Kazakhstan– unexplored Wealth -...

KAZKOMMERTSBANK

Kazakhstan–unexploredWealth

2006

annual report

Tyan-ShanfoothillsLatitude 54-12-38

North

Ongitude 112-61-22

East

part iii

Social Report

FinancialStatements

Singingsand-dunesLatitude 54-12-38

North

Ongitude 112-61-22

East

part ii

part iv

Results of the year

TimerlikcanyonLatitude 54-12-38

North

Ongitude 112-61-22

East

Ili river

Opening address of the Chairperson of the Board

Latitude 54-12-38

North

Ongitude 112-61-22

East

part i

annual report

2006

kazkommertsbank

contents

Opening Address of the Chairman of the Board

Results of the Year

Social Report

Financial Statements

I

II

III

IV

OpeningAddress of the Chairman of the Board

part i

Ili River Latitude 54-12-38

North

Longitude 112-61-22

East

Dear Sha rehol ders,Inves tors, Part ners and Cli ents!

The financial results for 2006 pro ve thatthe year has been of a remarkable success forKazkommertsbank. Recently, the Bank hasdemon stra ted stab le growth by strengthe ning itslea dership posi tion amongst the banks of theRepublic of Kazakhstan in terms of total assets,loan port fo lio and pro fits. Moreover for the firsttime the Bank beca me a lea der in terms of totaldepo sits as at the end of 2006.

The suc cess of the Bank’s finan cial year did nothap pen by chan ce, having alre a dy been fore cast assuch and dog ged ly imple men ted through theefforts of the Bank’s highly pro fes sio nal team.During the year, the acti vi ti es of the Bank weremar ked by a num ber of events which pro ved to bevery effec ti ve with ste a dy growth having beenachi e ved in three key seg ments—reta il ban king,small and medi um-sized busi nes ses and cor po ra teban king. These sec tors made a sig ni fi cant con tri -bu tion to the Bank’s suc cess.

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jsc kazkommertsbank

kazakhstan—unexplored wealth

annual report | 2006

Nina ZhussupovaChairman

of the Board

According to the International FinancialReporting Standards (IFRS), the con so li da ted assetsof the Bank in com pa ri son with the pre vio us yeargrew by 104.6%. At the end of 2005, the psycho lo gi -cal bar ri er of KZT1 tril lion (KZT1,195 bil lion, orUS$8 bil lion) was over pas sed whilst cur rent totalassets exce e ded KZT2.4 tril lion (KZT2,444 bil lion,or US$19.2 bil lion). Loans to cus to mers less loanloss pro vi sions accoun ted for KZT1,679 bil lion(US$13.2 bil lion) or 68.7% of total assets of the Bank.Net loan port fo lio growth for 2006 was 125.8%.

According to independent appraisals,Kazkommertsbank has confirmed its positionas the 4th largest financial institution in the CISregion in terms of total assets fol lowing Russianstate owned banks such as Sberbank, Vnesh-torgbank and Gazprombank. As a com pa ri son,in 2004 Kazkommertsbank held the 7th posi -tion which means that during just two years,the Bank out per for med such com pe tent finan -cial insti tu tions in Russia as Alfa-Bank, UralSibBank and the Bank of Moscow.

The pre vio us year’s trend was also con ti nu ed infinan cing the eco no mic sec tor of Kazakhstan whichrequi res long-term fun ding. Amongst the large-scale invest ment proj ects of Kazkommertsbank

there is impor tant finan cing of con struc tion proj -ects for seve ral enter pris es, such as recy cling plantsand cor ru ga ted goods pro duc tion faci lit ies inAlmaty and a cera mic brick manu fac tu ring plant inUralsk. In addit ion to this, the Bank is fun ding infra -struc tu re proj ects inc lu ding a second runway atAlmaty International Air port.

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The Ili—is the largest river in the Semirechie region. Itslength is 1,439 km. The river starts in China, at the terri-tory of the Almaty region it forms a man-madeKapchagai reservoir and falls into Balhash Lake after



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Also, a seri es of large-scale proj ects have alre a dybeen imple men ted or are in the pro cess of rea li za -tion in the real esta te sec tor. Last year, such elitehotels as the “Renaissance Atyrau”, the “RenaissanceAktau” and also the “Ritz-Carlton” were con struc tedin Atyrau, Aktau and Moscow. This year, the Esentai-park and Regional Financial Center, where the Headoffi ce of Kazkommertsbank will even tu al ly be loca -

ted, are being con struc ted in Almaty. Finally, the inte -gra ted deve lop ment proj ect of Chimbulak andMedeo, which was star ted at the end of 2006, willtran sform these loca tions into first-class moun tainlei su re resorts at the international standards.

Having started in 2005 re-structuring the loanportfolio in favor of the sectors of economy havinghighest growth and development prospects con-tinued last year. Financing of large-scale con struc -tion in Astana, Almaty and Atyrau inc re as ed ourexpo su re to the con struc tion in the loan port fo liofrom 27.1% to 29% and together with finan cingtrade (17.6%) and reta il (15.6%) sec tors res ul ted into62.2 % of the total loan port fo lio as at 31 December2006.

2006 was a remar ka ble year for reta il growth inc -lu ding small and medium-sized businesses whichwas obser ved in four main direc tions:

Branches. The expan sion and moder ni za tion ofope ra tio nal divi sions con ti nu ed during the yearwith 111 new branches having been esta blished incom pa ri son to 40 in the pre vio us year.

Client seg men ta tion. Special focus was made toattrac ting cli ents from small and medium-sizedbusinesses and mid dle class indi vi du als and unitscove ring these busi ness seg ments were for med.

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The Ili River falls into Balhash Lake through severalbranches (so called bakanases) and forms a wide delta

Product lines spe ci fi cal ly for small and medium-sized businesses are being acti ve ly ren ewed.

Process auto ma ti on. The eli mi na tion of manu alpro ces ses at the Bank and the expan sion of alter -na ti ve ser vi ce chan nels are being con ti nu ed. Since2002, the latest com pu ter systems have beeninstalled which have helped to auto ma te morethan 200 banking pro ces ses. The ATM and theInter net ban king chan nels are con stan tly expan -ding and finan cial Inter net-por tals for remo te ban -king are being acti ve ly deve lo ped. With the help ofthe inter net-exchan ge cal led MP.kz, cre a ted by theBank’s spe cia lists, the pro cess of buy ing goods andser vi ces for the Bank has been opti miz ed.

Risk mana ge ment in the line with the worldbest practice. In the line with the world bestprac ti ce in cre dit risk mana ge ment, the inte gra -tion of a Market Risk Management (MRM) andOperational Risk Management (ORM) systemshas been star ted. With this aim stan dar di za tionand cen tra li za tion pro ces ses for deci sion mak-ing pur po ses in reta il ban king were under ta ken.Behavioral sco ring models for dif fe rent reta iland small and medium-sized businesses ban -king pro ducts are also being deve lo ped andimple men ted.

With the rapid inc re ase in reta il len ding (168.6%in 2006 com pa red to the end of 2005) it is worthmen tio ning that mort ga ge len ding and car loansdec re as ed cor res pon din gly from 64.7% to 56.7% andfrom 8.8% to 6%. Such decrease was primarily due toan increase in the popu la ri ty of con su mer len ding(28.6%) and other types of loan (8.7%).

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The name of the river comes from Mongolian “ilansy”meaning “blinking, glittering”. The Ili is formed byjunction of the Kunges and Tekes Rivers originatedin the North Tyan-Shan mountains

Customer accounts remain the main sour ce ofthe Bank’s fun ding sour ce. By the end of the year,cus to mer accounts had inc re as ed by 2.3 timesand reached KZT687.8 bil lion (US$5.4 bil lion).This figu re repres ents almost 20% mar ket shareand as such, Kazkommertsbank beca me the num -ber 1 Bank in Kazakhstan in terms of gen era ted

depo sits. Corporate cus to mers’ depo sits growthaccoun ted for KZT298.3 bil lion. (or 154.3%) asrepor ted on 31 December 2006 from KZT193.4bil lion as at 31 December 2005 to KZT491.7 bil -lion as at the end of 2006. The value of pri va te sec -tor funds for this period inc re as ed by KZT86.1 bil -lion (or by 78.2%) from KZT110 bil lion to KZT196.1 bil lion.

The 2006 report reflects the prio ri ty thatKazkommertsbank pla ced on small and medi um-sized busi nes ses and len ding in this sec tor during2006 had more than doub led since the pre vio usyear.

2006 also reflec ted a period of inter nal pro ces -ses res truc tu ring to pro vi de for the futu re deve -lop ment of busi ness effec ti ven ess and pro fi ta bi li -ty with par ti cu lar empha sis on sig ni fi cant chan -ges to the risk mana ge ment system which wasaccom plished in close coop era tion with ABNAMRO Risk Management Advisory. As a res ult,ongo ing res earch into the real esta te and secu rit -ies mar kets enab les bet ter mana ge ment of mar -ket risks. Rating and eco no mic price for ma ti onmodels are being impro ved in rela tion to cre ditrisks in cor po ra te ban king. Finally, a major pro -gram on reta il acti vi ti es inc lu des acti ve usage of

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It is very peculiar that coming through endless rowof sand-dunes the river as if poured into the clearestlakes covered with water-lilies, surrounded by fruitybirds and brakes of cane

CRM system and the pro-acti ve use of sco ringmodels which help to sim pli fy and stre am li ne thelen ding pro cess.

On 31 December 2006, the most autho ri ta ti vefinan cial maga zi ne “The Banker” once againnamed Kazkommertsbank as the best Bank inKazakhstan and spe ci fi cal ly highlighted its sta tusas a techno lo gi cal lea der. By 31 December 2006,

the Bank’s pro ces sing system ser ved 556 ATMs inc -lu ding 71 with cash depo sit capa bi lit ies, 190 ban -king inter net booths and near ly 4,400 POS ter mi -nals. The amount of cards issu ed by the Bank leaptfrom 400 thou sand to 615 thou sand during a sin gleyear. In addit ion to this, the use of on-line finan cialinter net-por tals for remo te banking (HomeBank.kzfor indi vi du als and OnlineBank.kz for cor po ra te cli -ents) inc re as ed sig ni fi can tly with the total num -ber of HomeBank.kz users having jum ped from40,000 to 80,000.

As a res ult of two suc ces sful invest ments into theBank’s com mon sha res and the issue of subor di na -te obli ga tions during 2006, the Bank’s capi tal inc -re as ed thre e fold from KZT81 bil lion to KZT249 bil -lion (US$2 bil lion). As a res ult of ste a dy ope ra tio nalgrowth, the expan sion of the cli ent base and thelaunch of new pro ducts, the net inco me of theBank in 2006 tota led to KZT29,586 bil lion(US$234.6 mil lion) repres en ting a sub stan ti algrowth of 49.3% over the pre vio us year. Earningsper share inc re as ed from KZT50.95 in 2005 toKZT64.83. Moreover, amongst the pri va te finan cialinsti tu tions, Kazkommertsbank has the mostendu ring cre dit rating of BB+ from Standard &Poor’s and Fitch Ratings.

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There are a lot of colorful fishes splashing in thewaters of small lakes on their way to Balhash Lake.All this picturesque landscape is approachable whiletraveling by the Ili River

Unlike other banks in Kazakhstan, which werecre a ted on the basis of sovi et banks with strong capi -tal and per manent cli ents, Kazkommertsbank star -ted its acti vi ti es from zero and during 15 years sinceits for ma ti on it has beco me the lar gest pri va te Bankon the ter ri to ry of the for mer Soviet Union. At theend of 2006, Kazkommertsbank was the first bankfrom Kazakhstan to undertake and successfullyfinalize its inter na tio nal public offe ring on theLondon Stock Exchan ge and in doing so, the yearmar ked the foun da tion for the Bank’s futu re deve -lop ment.

Finally, it is worth say ing that the Bank con si dersthe deve lop ment of part ner rela tionship as themain way to orga ni ze effec ti ve coop era tion withits cli ents, cre di tors and inves tors, and also aims inevery pos si ble ways to con tri bu te towards theirsuc ces ses.

We are gra te ful to our sha rehol ders, cli ents andpart ners, with whom we have experienced manyyears of productive and mutually beneficial coop-eration.

N.A. Zhussupova,Chairman of the Board

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Results of the Year

part ii

Singingsand-dunesLatitude 54-12-38

North

Longitude 112-61-22

East

ii.01

jsc kazkommertsbank annual report | 2006


Balance Analysis

The Bank has con ti nu ed to keep high rateof assets growth. Thus, as at 31 December 2006 thevolu me of the Bank’s assets came up to 2,444.3 bil -lion tenge (19.2 bil lion US dol lars), having inc re as -ed by 104.6% com pa red to 1,194.9 bil lion tenge (8.9bil lion US dol lars) as at 31 December 2005. TheBank’s assets growth rate in 2005 came up to 69.7%com pa red to the one as at the end of 2004.

Basic assets growth took place on account of inc re -ase of the loan port fo lio volu me by 125.8% (or by935.4 bil lion KZT). As at 31 December 2005 net volu -me of loan port fo lio inc re as es to 1,678.8 bil lion tenge(13.2 bil lion US dol lars) com pa red to 743.4 bil liontenge (5.5 bil lion US dol lars) as at the end of 2005.

The Bank’s assets struc tu re has under gone sig ni -fi cant chan ges during the year of 2006. The lar gestshare in the Bank’s assets struc tu re con ti nu o uslybelongs to loans to cus to mers and as at 31December 2006 the share of loan to cus to mers’ inc -re as es to 68.7% com pa red to 62.2% as at the end of2005. The share of finan cial assets, esti ma ted byfair value through inco me or loss, has inc re as ed to13.2 % as at the end of 2006 com pa red to 11.7% as atthe begin ning of the year. As a res ult of tighte ningof mini mal res er ve requi re ments poli cy by theNational Bank of the Republic of Kazakhstan in2006, the share of mon eta ry assets in the National(cen tral) Bank of the gen eral assets of the Bank inc -re as ed to 8.6% as at 31December 2006 com pa red to3.1% as at 31 December 2005. The share of bank tobank pla ce ment in the assets of the Bank dec re as -ed to 8.1% as at the end 2006 from 21.3% as at theend of 2005. graph 1,2, 3

Loan portfolioAs at 31 December 2006 loan portfolio (gross)

increases to 1,936.9 billion tenge compared to 885.5billion tenge as at 31 December 2005, the growthrate increases to 118.7% (or by 1,051.4 billion tenge)

Other assetsLoans to customers(net)

68

.7%

13

.4% 8

.6%

8.1

%

0.6

%

0.6

%

graph 2

68.7% Loans to customers

13.4% Marketable securities through income or loss,securities and stocks investments

8.6% Money assets and accounts in national (central) banks, precious metals

8.1% Bank to bank loans and banks assets

0.6% Fixed assets and intangible assets

Assets structure as at 31 December 2006

Assetsas at 31 December 2006

graph 1

74

3.4

45

1,5

1 6

78

.87

65

,5

20

05

20

06

Billion KZT

20

04

50

3.3

20

0,7

economics, such as: construction and buildingmaterials, private sector crediting, metal-fabricatingindustries, trade, and operations with real estate.Lending to construction, trade, private sector havethe biggest share in the loan portfolio—their cumu-lative share in loan portfolio as at the end of the yearincreased to 62.2% against 59.4% as at the beginningof the year. Besides this, the Bank offered funding tomedium companies, acting as sub-contractors orattending companies, which carry out large interna-tional projects in Kazakhstan.

As at the year ended 31 December 2006 the struc-ture of loan portfolio underwent some changes.Thus, loans to construction and building materialsincreased by 2.4 times and their share increasedfrom 27.1% as at the end of 2005 to 29% as at theend of 2006 due to the development of large-scaleconstruction in Astana, Almaty and Atyrau. Loansto trade companies increased by 2.1 times, in spiteof the decrease of their share in the total portfolioto 17.6% as at the end of 2006 compared to 19.1% asat the end of 2005. The volume of loans to privatesector continued to grow (the growth is by 2.7times compared to as at the end of 2005), the shareof these loans in the total portfolio had increasedfrom 13.1% as at 31 December 2005 to 15.6% as at31 December 2006.

The volume of loans for real estate purchaseincreased by 9.2 times during the year 2006, theshare became 8.2 %. The loans to transport compa-nies and communication enterprises decreased by1.4%, their share in total loan portfolio decreasedto 2.3% as at the end of 2006 from 5.3% as at theend of 2005. The Bank considers metallurgy andmining industry sector as one of the sectors,where decrease of borrowings is expected in thefollowing years. During the year of 2006 the vol-umes reduction by 15.3% is becoming evident,their share in total portfolio remains insignificantand decreases to 1.2% as at the end of 2006, com-pared to 3.2% as at the beginning of the year. Oiland gas sector is presented by large Kazakhstan

ii.03



compared to 75.9% as at the end of 2005. Includingbut not exclusively, the loan portfolio (gross)increased to 1,752.8 billion tenge, having increasedby 967.2 billion tenge (by 123.1%) compared to thebeginning of the year (785.6 billion tenge). Growthrate of the documentary crediting (gross), presentedby the Bank along with the trade and project fund-ing, during the 2006 came to 84.3%, that led to theincrease of 184,1 billion tenge as at the end of 2006compared to 99.9 billion tenge as at the end of 2005.

The credit portfolio structure is shown in thetable below. chart 1

The Bank also pro vi des its ser vi ces to large andmedi um Kazakhstan indu stri al com pa ni es andtran sna tio nal com pa ni es, ope ra ting inKazakhstan, through offe ring a wide range of ban -king pro ducts inc lu ding trade fun ding, proj ect fun -ding, short term len ding, small and medi um-scalebusi ness len ding. At the same time the Bank offersits ser vi ces to a pri va te sec tor, car ry ing out con su -mer and mort ga ge loans, cre dit cards loans, andalso loans to pri va te entre pren eurs under the smallbusi ness sup port pro gram.

In the year of 2006 the Bank continued toincrease the volumes of loans to different sectors of



Loan portfolio structure as at 31 December

Billion KZT Share, % Billion KZT Share, %

Loans to customers 1.717.756 92.4 772.006 91.8

Loans, by REPO contracts 35,020 1.9 13.567 1.6

Total loans to customers 1.752.776 94.3 785.573 93.4

Provisions for losses on loans to customers (73,936) (4.0) (42.162) (5.0)

Net loans to customers 1.678.840 90.3 743.411 88.4

Contingent liabilities

Letters of guarantee 91.683 4.9 39.928 4.8

Letters of credit 92.413 5.0 59.951 7.1

Total letters of guarantee and letters of credit 184.096 9.9 99.879 11.9

Provisions for losses on contingent liabilities (4.055) (0.2) (2.589) (0.3)

Total contingent liabilities, net 180.041 9.7 97.290 11.6

Total Loan portfolio, net 1.858.881 100.0 840.701 100.0

20

06

20

05

chart 1

62

.2%

21.3

%

11.9

%

3.1

%

0.7

%

0.8

%

graph 3

62.2% Loans to customers

21.3% Marketable securitiesthrough profit or loss,securities and investments in stocks

11.9% Money assets and accounts in national (central) banks, precious metals

3.1% IBC (inter-bank credits) and assets in banks

0.8% Other assets

0.7% Fixed assets and intangible assets

Assets structure as at 31 December 2005

Loan to cus to mers col la te ra liz ed by a pled ge ofreal esta te, let ters of gua ran tee, goods, equip -ment, govern ment secu rit ies, stocks and depo sits.The asses sment of col la te ral takes a very con ser va -ti ve appro ach; inde pen dent experts are invi ted ifneces sa ry. As at 31 December 2006 the share ofuncol la te ra liz ed loans was 15.2%, com pa red to9.5% as at the end of 2005. The short-term loansexten ded to reli ab le cli ents pre vail in the struc tu -re of uncol la te ra liz ed loans. chart 2

The Bank continuously carries out work onimprovement quality of loan portfolio. The shareof “reliable” and “potentially reliable” loansincreased by 927.6 billion tenge (increase by 2.3times), and amounted to 1,633.4 billion tenge onDecember 31, 2006 compared to 705.8 billiontenge as at the end of 2005. The share of “reliable”and “potentially reliable” loans increased from91.4% as at the end of 2005 up to 95.1% as at 31December 2006. The share of “insufficiently reli-able” loans increased by 10.8 billion tenge (that isby 26.3%), the share in total volume of loan portfo-lio decreased from 5.3% as at 31 December 2005 to3.0% as at the end of 2006. The “loss” and “doubt-ful” loans increased by 7.3 billion tenge (that is by29.2%), whilst their share in the total volume ofloan portfolio decreased from 3.3% as at the end of2005 to 1.9% as at 31 December 2006. graph 6

The Bank’s credit risk is concentrated in portfo-lio of loans, letters of credit and letters of guaran-teer to clients. Due to improvement of financial

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jsc kazkommertsbank annual report | 2006 jsc kazkommertsbank annual report | 2006

kazakhstan—unexplored wealthkazakhstan—unexplored wealth

companies, and also by relatively small develop-ing local oil-producing companies with existingindustrial infrastructure. As at 31 December 2006the volume of loans to oil and gas industry hadincreased to 44.9 billion tenge, compared to thebeginning of the year and having 30.2 billiontenge as at 31 December 2005 (increase by 48.8%).Despite the volumes increase, their share in totalloan portfolio decreased to 2.7% as at the end of2006 from 4.1% as at the end of 2005. Loans to agri-cultural companies increased by 64%, the share ofthese loans in total loan portfolio of the Bankdecreased from 3.2% as at the end of 2005 to 2.3%as at 31 December 2006, it has connection to thefact that the growth of total loan portfolio sub-stantially surpassed growth of loans to agricultur-al companies. Loans to agricultural companies aremainly given to large integrated companies,which are involved into all phases of grain produc-tion and processing.

The share of loans to food industry in total loanportfolio decreased from 3.9% as at the end of 2005to 3.1% as at 31 December 2006, having increase oftotal sum of loans to this sector by 81.4%. Loans tothese companies are principally provided to largeconglomerates with potential export capacity. graph 4

In the line with the Bank’s policy to limit itsforeign currency risk, the major part of loanportfolio of the Bank comprise foreign currencyloans, with a significant proportion of US dollars-denominated loans. As at 31 December 2006 theUS dollars-denominated loans comprised 66.6%of the Bank’s loan portfolio, compared to 67.5%as at the end of 2005. Tenge loans grew by 2.4times as at 31 December 2006, compared to theend of 2005, their share in total portfolioincreased up to 31.1%. In the most cases theterms and conditions of loans include the provi-sions allowing the Bank to increase its interestrates or to demand early repayment in case ofsubstantial devaluation of tenge.graph 5

15

.59

% 29

.01%

17

.63

%

8.2

3%

5.2

3%

3.1

4%

8.9

2%

2.3

2%

2.4

5%

2.6

7%

2.3

%

1.2

1%

1.3

%

graph 4

29.01% Construction and constructing materials

17.63% Trade

15.59% Private sector

8.92% Other

8.23% Real estate operations

5.23% Financial and related industries

3.14% Food industry

2.67% Oil and gas industry

2.45% Hotel service and public catering

2.32% Agriculture

2.30% Transportand communication

1.3% Metal fabricating industries

1.21% Raw materials industry and metallurgy

Loan portfolio structure by the sectors of economics

graph 5

2,1

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06

2,9

20

05

2.6

66

.6

67

.5

73

.9

31.3

29

.6

23

.52

00

4

%

OtherUS dollarsKZT

As at 31 December


Collateralized loans 1.424.115 84.8 672.683 90.5

Uncollateralized loans 254.725 15.2 70.728 9.5

Total 1.678.840 100.0 743.411 100.0

20

06

20

05

chart 2

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Cash assets and accounts with national (central) banksAs at 31 December 2006 the volume of cash and

assets with the National Bank of the Republic ofKazakhstan and in central banks of the RussianFederation and the Republic of Kyrgyzstan (includ-ing precious metals) amounted to 209.8 billiontenge, that is by 5.6 times (or by 172.6 billion tenge)higher than the volumes at the end of the last year.The substantial growth took place in assets hold onthe correspondent account with the National Bankof Kazakhstan (by 155.5 billion tenge). It becamepossible due to to tightening of minimal reserverequirements for calculation by the National Bankof Kazakhstan in the year of 2006. As a result ofthese requirements the Bank has to reserve 6% and8% for all its internal and external obligationsrespectively. In the structure of money assets andaccounts with in the National (Central) Bank by tothe types of currencies as at 31 December 2006,90.4% are presented by tenge assets, compared to44.1% of tenge assets as at 31 December 2005.

Operations on purchase/sale of cashIn the year of 2006 the turnover of the Bank on

purchase / sale of cash increased by 63.8% in com-parison to 2005 due to substantial increase of salesvolume (by 69.1%). chart 3

state of borrowers, due to stable development ofKazakhstan economics, the effective rate of pro-visions on loans to clients continues to decreaseand as at 31 December 2006 it amounted to 4.3%in comparison to 5.5% as at 31 December 2005.graph 7

As at 31 December 2006 total credit risk shareof twenty largest borrowers of the total loanportfolio amounted to 25.3%, having decreasedfrom 26.8% as at 31 December 2005. The Bankexpects further decrease of concentration ofloan portfolio through attraction of new bor-rowers. graph 8

The general tendency of last several years wasloan terms maturity in accordance with theclients’ demands. The volume of loans with therepayment term from one year to five years roseby 2.2 times. However, their share in the loanportfolio decreased to 37.6% as at 31 December2006, compared to 39.2% as at 31 December2005. The decrease of their share is connectedwith a fact, that the growth rate of long-termloans with the repayment term of more thanfive years was higher. Thus, as at 31 December2006 the growth of loans volumes with therepayment term of more than five years hadincreased by 2.4 times and their share in theloan portfolio increased up to 28.2% as at the endof 2006 from 27% as at 31 December 2005. Thisfactor reflects a higher client’s demand forlonger-term loans, which the Bank providesboth from its own funds and in the framework offacilities from EBRD, international financialorganizations and the Government of theRepublic of Kazakhstan. The share of short-termloans (either less than one month and from onemonth to one year) as at the end of 2006 also hadchanged and amounted to 6.6% and 27.6% , com-pared to 5.3% and 28.5% as at the end of 2005respectively. graph 9


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graph 6

1.2

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2.4

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3.7

39

.9

38

.5

36

.2

55

.2

52

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.52

00

4

5.4

0.7

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3.6

35

.04

7.0

20

03

%

3.0

5.3

7.0

9.1

Provisions / loan portfolio

graph 7

20

04

5.7

5.5

4.3

20

05

20

06

%

20

03

6.3

Loans concentration (20 largest risk exposures)

graph 8

20

04

24

.8

26

.8

25

.3

20

05

20

06

%

20

03

30

.3

LossDoubtfulInsufficiently reliable Potentially reliableReliable

graph 9

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05

37

.6

39

.2

36

.3

28

.2

27

.0

25

.32

00

4

6.6

5.37

.7

%

27

.6

28

.530

.7

Less than 1 monthFrom 1 to 12 monthsFrom 1 to 5 yearsMore than 5 years

Operations on purchase/sale of cash

Annual volume of currency sale, billion US dollars 868.4 513.5 69.1

Annual volume of currency purchase, billion US dollars 186.7 130.5 43.1

Net profit, billion KZT 645 475 35.8

Net profit / Sale volume, % 0.6 0.7

20

06

20

05

сh

an

ge

, %

chart 3

they consisted of state treasury bills issued by theRepublic of Kazakhstan Ministry of Finance (16.8%),notes of the National Bank of RK (13.5%), bills of FDSE(12.7%), bills of Kazexportastyk (11.6%), bonds ofKazakhstan Mortgage Company (10.3%) and othersecurities of reliable Kazakhstan companies.

The volume of securities held-to-maturitydecreased by 205 million tenge (from 562 milliontenge as at the end of 2005 to 357 million tenge as atthe end of 2006) mainly due to the selling of statetreasury bills issued by the RK Ministry of Finance.

The volume of investments in associated compa-nies increased by 4.1% (or by 1.330 million tenge).The growth took place as a result of purchasing 50%of company managing Pension Asssets JSC “Jetysu”shares amounting 993 million tenge, moreover, dueto the increase in cost of Pension Fund “Ular Umit”shares by 337 million tenge. graph 10

A significant increase (by 2.5 times or by 182.2 mil-lion tenge) took place in the Bank’s marketable secu-rities; obligations (95.9%), stocks (1.9%) and derivedfinancial instruments (2.2%) are included in its struc-ture. In 2005, the structure was as follows: obliga-tions—98.7%, stocks—1.2% and derived financialinstruments—0.1%. The volume of obligationsincreased by 2.2 times during the year of 2006 andamounted to 309.4 billion tenge at the end ofreviewed year, compared to 138.6 billion tenge as atthe beginning of the year. The volume of highly liquidand state securities of the non-CIS countries issuers(USA government, Freddie Mac, Fannie Mae, Caissed’Amortissement la Dette Sociale, JSC “AllianceBank”, KFW International Finance, DEPFA BANK PLC,DEXIA BANQUE INTL, FORTIS BANQUE, GreekGovernment Bonds, euro obligations of JP MorganChase Bank London) which is significant. In the yearof 2006 the Bank activated its participation in theInternational Stock Market. The volume of securitieswith high liquidity issued by the non-CIS countriesissuers increased by 116.3 billion tenge from 109.3 bil-lion tenge as at 31 December 2005 up to 225.6 billion

ii.09


Marketable securities, investments in securities and associated companiesAs at 31 December 2006 the volume of marketable

securities and investments in securities and associ-ated companies amounted to 327.4 billion tengeand had grown by 2.3 times, compared to 141.8 bil-lion tenge as at 31 December 2005. The substantialgrowth took place in the volumes of foreign curren-cy by 93.7%, despite the decrease of their share to75.2% as at the end of 2006, compared to 89.6% as atthe end of 2005. The increase became possible as aresult of purchase of high marketable securities ofnon-CIS countries issuers in the volume of 225.6 bil-lion tenge. Due to the purchasing short-term notesof the National Bank of Kazakhstan for the amountof 34.9 billion tenge, the volume of securities intenge increased by 5.5 times, and its share hadincreased up to 24.8% as at the end of 2006, com-pared to 10.4 as at the end of 2005. chart 4

The portfolio structure as at the end of 2006 didnot undergo any substantial changes. As at 31December 2006 the share of marketable securitiesamounted to 98.6%; the volume of securities avail-able for sale was 0.8%; held to maturity was 0.1%; vol-ume of investments in associated companies was0.5%, compared to 99%, 0.3%, 0.4% and 0.3% respec-tively, as at 31 December 2005.

The share of securities available for sale as at 31December 2006 amounted to 2,628 million tenge and

ii.08



As at 31 December

Marketable securities 322.618 140.375

Securities available for sale 2.628 427

Securities held-to- maturity 357 562

Investments in associated companies 1.755 425

Total securities and investments with associated companies 327.358 141.789In KZT 81.198 14.711In currency 246.160 127.078

20

06

20

05

chart 4


graph 10

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04

20

06

20

06

Million KZT

BondsShares Financial instruments

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06

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05

74

.30

8

13

8.5

68 2

09

.40

5

6.1

26

7.0

87

December 2006 amounted to 857 million tenge,compared to 1.245 million tenge as at 31December 2005. The decrease of provisions vol-ume by 31.2% became possible as a result ofdecrease of advances volumes to banks.

ii.11



tenge as at 31 December 2006, the growth was by 2.1times, despite of the decrease of the share to 69.9% asat the end of 2006 from 77.8% as at the end of 2005.

Also the volume of the Government securities(notes of the National Bank of RK, treasury bills ofthe Ministry of Finance of RK, bonds of theDevelopment Bank of Kazakhstan) increased from7.8% as at the end of 2005 up to 11.6% as at the endof 2006. The growth took place basically due to thepurchase of notes of the National Bank of RK for theamount of 33.9 billion KZT.

The Bank continues investing assets into securi-ties of reliable Kazakhstan companies and munici-pal bonds (their volume as at 31 December 2006amounted to 44.7 billion KZT), also into securitiesof the Russian Federation (the volume amountedto 8.3 billion tenge as at 31 December 2006, com-pared to 6.7 billion tenge as at the beginning of theyear). graph 11

Loans and advances to banks The volume of loans and advances to other banks,

net provisions by the end of the year 2006 amount-ed to 197.191 billion KZT, and decreased by 22.5% ,compared to the end of the year 2005, mainly due tothe short-term deposits repayments. The share ofbank to bank placement in the Bank’s assets struc-ture amounted to 8.1%, compared to 21.3% as at theend of 2005. The Bank keeps using conservativeapproach, in respect of placing funds within theother banks. The funds are usually placed for shortterms in accordance with the established limits ofbanks, unless the deposits are secured by theGovernment securities or money assets, moreoverthose deposits are placed within the first classWestern banks. Particularly the basic volume ofloans and advances to banks as at 31 December 2006was deposited for the period of up to three months(88.3%). The share of advances to banks in US dollarsamounted to 45.8%, in national currency—to 38.9%.

The volumes of formed provisions for possiblelosses on loans and advances to banks as at 31

ii.10



72

.9%

12

.3%

12

.1%

2.7

%

graph 11

Bonds structure as a breakdown on issuers as at 31 December 2006

12.1% Notes of the National Bank of RK

2.7% Notes of the Russian Federation

72.9% Securities of non-CIS countries

12.3% Securities of CIS countries and Baltics, except Russia

On the right bank of the Ili River, in the north-eastdirection from Almaty city there is one unique sand-dune called Singing—it is other miracle of the world

As at 31 December, million KZT

Correspondent accounts 30.277 18.478

KZT 845 199

Foreign currency 29.432 18.279

Loans and deposits to banks 122.266 236.671

KZT 30.296 3.532

Foreign currency 91.970 233,139

Provisions for loan losses (857) (1.245)

Loans and advances to banks, net 151.686 253.904

Loans to banks under REPO contracts 45.505 383

KZT 45.505 383

Foreign currency 0 0

Loans and advances to banks, total 197.191 254.287

20

06

20

05

chart 5

During the year of 2006 average interest-bearingliabilities increased by 78.4% from 673.2 billiontenge within the year of 2005 up to 1,201 billiontenge within the year of 2006. This increase hasbeen generated by increase in issued debt securi-ties by 70.3% from 242.4 billion tenge in 2005 up to413 billion tenge in 2006. graph 12

Loans and advances from banks and other financial institutionsThe amount of assets and loans from banks and

other financial institutions as at 31 December2006 increased up to 953.1 billion KZT, havingincreased by 2.2 times compared to the end of theyear 2005. Banks shares of total liabilitiesincreased to 43.7% as at 31 December 2006 if com-pared to 38.8% as at 31 December 2005. In thestructure of these banks liabilities there are sever-al types of funding. chart 6

The Bank's funding baseDuring the year of 2006 the Bank’s liabilities

increases by 97.0% from 1,106.6 billion tenge as atthe end of 2005 up to 2,180.4 billion tenge as at theend of 2006, mostly as a result of long-term borrow-ings at the international markets in order to pro-vide customers with long-term financing.

The volumes of interest-bearing liabilitiesincreased by 97%, mainly as a result of assets volumeincreases received from banks and financial institu-tions by 2.3 times (from 379.2 billion tenge as at theend of 2005 up to 884.3 billion tenge as at the end offinancial year), through increase of borrowings inthe local market (customers accounts) by 2.3 times(from 303.4 billion tenge as at 31 December 2005 upto 687.8 billion tenge as at the end of 2006), addi-tionally, as a result of issuing long-term debt securi-ties (growth in liabilities for long-term issued securi-ties, equivalent to 39.9% from 303.1 billion tenge inthe preceding financial year up to 424.2 billiontenge as at 31 December 2006).

The structure of interest-bearing liabilitiesunderwent to certain changes as per the end of2006. Consequently, the share of loans andadvances, received from banks and financial insti-tutions in total volume of interest-bearing liabili-ties increased up to 41.2% as at 31 December 2006,compared to 34.8% as at the end of 2005, the sameway as the share of customers accounts increasedto 32.1%, compared to 27.9%. As a result of aforesaidassets share increase and despite the growth of vol-umes, the share of issued securities decreased from27.8% as at the end of 2005 to 19.8% as at the end offinancial year. The share of subordinated loandecreased to 3.7% as at the end of 2006 in compari-son to 4.8% as at the end of 2005. Other borrowedfunds consist of liabilities to InternationalFinancial Organizations, the Ministry of Finance ofRK and the Small-scale Entrepreneurship SupportFund, their share in total interest-bearing liabilitiesof the Bank decreased to 3.2% as at the end of 2006,compared to 4.7% as at the end of 2005.

ii.12


ii.13



As at 31 December


Loans and advances from banks 884.301 92.8 379.206 88.2

Correspondent accounts of other banks 46.273 4.9 29.121 6.8

Loans and advances from banks and other financial institutions 285.161 29.9 50.218 11.7

Loans from the National Bank of RK — — 3,617 0.8

Syndicated loan 294.711 30.9 226.528 52.7

Loan from EBRD 7.304 0.8 10.611 2.5

Loans by REPO contracts 250.852 26.3 59.111 13.7

Other borrowed fund 68.814 7.2 50.604 11.8

Funding from the Ministry of Finance of the Republic of Kazakhstan and Kyrgyzstan 262 0.03 424 0.1

Program on securitization of future payments flows 56.792 6.0 39.806 9.3

Funding from the Small-scale Entrepreneurship Support Fund — — 21 0.005

Long- term loans from other organizations 11.760 1.2 10.353 2.4

Total borrowed fund 953.115 100.0 429.810 100.0

20

06

20

05

chart 6

graph 12

De

ce

mb

er

20

05

500 000

1 000 000

1 500 000

2 000 000

2 500 000

Se

pte

mb

er

20

06

De

ce

mb

er

20

06

Million KZT

Ju

ne

20

06

Ma

rc

h 2

00

6

Other liabilitiesSubordinated debt Other borrowingsDebt securitiesFunds and deposits of customersLoans and advances from banks

of small-scale entrepreneurship, developmentof import-substitutional and export-orientedproduction.

Kazkommertsbank is operating as a clearingbank for other banks, working within the territoryof Kazakhstan, what keeps free and stable accountsin the Bank: as at 31 December 2006 the volume offunds on correspondent accounts with other banksamounted to 46.3 billion KZT, having increasedwithin the year by 58.9% in comparison with 29.1billion tenge as at 31 December 2005. graph 13

As at 31 December 2006 the volume of customerdeposits increased by 126.7% and amounted to687.8 billion tenge (due to increase of corporatecustomer deposits by 154.3% and of individuals’deposits by 78.2%). Deposits ratio in foreign cur-rency decreased from 55.3% in 2005 to 43.7% infinancial year. Deposits appear to be very impor-tant and stable source of short-term and long-termfunding for the Bank, for this reason the Bank hasstrong intention to keep increasing the internalfunding via increasing time deposits and offeringcompetitive market terms on customer deposits.The Bank is the member of Kazakhstan Retail

In 2006, the Bank had substantially increased(by 2.3 times) the volumes of loans and advances,received from banks in comparison to the year of2005. During the course of 2006 the Bank signedan agreement for syndicated loan for the amountof 850 million US dollars with maturity inFebruary 2008, the mandated leading arranger isING Bank N.V., and two agreements in theamount of 300 million US dollars and 700 millionUS dollars maturing in December 2009 andDecember 2007 respectively. The arrangers ofboth loans were the Bank of Tokyo Mitsubishi,ING NV, UniCredit, Standard Chartered Bank.

As at the end of December 2006 the Bank ful-filled outstanding liabilities as per the loanagreement on syndicated loan for the amount of816.7 billion US dollars, arranged by The Bank ofTokyo Mitsubishi, Ltd., CALYON, Commertsbankand Deutsche Bank AG, London branch. As wellas in August 2006 had been repaid another syndi-cated loan amounting of 400 million US dollars,arranged by Citibank International Plc. The vol-umes of other received advances increased by36% in comparison to 2005 for the reason of lia-bilities allocation within the limits of the futurepayments flows securitization Program. Thegrowth of liabilities volume increase by 42.7%and as at 31 December made up 56.8 billiontenge in comparison to 39.8 billion tenge as atthe beginning of the year. Those liabilities wereissued through Kazkommerts DPR Company(special legal entity, established in theKaymanov Islands) and secured by future pay-ments flows of the Bank in US dollars. Thearrangers of securitized obligations of KKBappeared to be JPMorgan Securities Ltd. andWestLB AG.

In the year of 2005, the Bank continued estab-lishing credit lines within the RK Ministry ofFinance, which is the financial agent of ADB,EBRD and the Government of RK on programs ofagricultural support, support and development

ii.14


ii.15



customer deposits

graph 13

20

04

114

.68

3.1

19

3.4

110

.0

49

1.7

19

6.0

20

05

20

06

Billion KZT

IndividualsCorporate customers

As at 31 December

Million KZT Share, % Million KZT Share, %

KZT:

Demand deposits 161.500 23.5 58.033 19.13

Time deposits 225.884 32.8 77.714 25.61

387.384 56.3 135.747 44.74

Foreign currency:

Demand deposits 96.100 14.0 56,171 18.51

Time deposits 199.938 29.1 111.487 36.74

296.038 43.1 167.658 55.25

Total customers deposits 683.422 99.4 303.405 99.99

Deposits by REPO agreements 4.384 0.6 32 0.01

Total Customers deposits with REPO 687.806 100.0 303.437 100.0including:Corporate customers 491.734 71.5 193.396 63.7Individuals 196.072 28.5 110.041 36.3

20

06

20

05

chart 7

to 24.5% in 2005. Despite the fact that depositsvolume is continuing to be significant, the Bankintends to decrease the total local funding, byoffering services to individuals, small and medi-um-sized corporate customers. graph 14

Issued debt securities The important source of funding turns to be

debt securities, and from 1998 the Bank displayshigh activity in euro liabilities market. As at31 December 2006 the volume of issued debtsecurities increased up to 39.9% and made up424.4 billion KZT. This increase took place due tothe additional issues of euro liabilities. In thisrespect, in February 2006 the Bank placed 3-yeareuro liabilities in exotic currency (Singapore dol-lars), amounting 100 million Singapore dollarswith coupon rate 4.25%. In March 2006, the Bankplaced euro liabilities for the amount of 300 mil-lion euro with the coupon of 5.125% and maturi-ty of 5 years, and in November 2006, the Bankplaced euro liabilities in the amount of 500 mil-lion US dollars with the coupon of 7.5% with thematurity of 10 years. The share of debt securitiesin total liabilities of the Bank decreased to 19.5%as at 31 December 2006 in comparison to 27.4%as at 31 December 2005 due to decrease inclients’ assets share.

Subordinated debtSubordinated debt of the Bank increases to

78.9 billion tenge as at 31 December 2006, whichrises by 51.2% from 52.2 billion tenge as at 31December 2005. The increase in 2006 was due tothe release of 10-year subordinated liabilitiesamounting for 200 million US dollars in July2006 with coupon of 8.625% and additionally bythe release of 10-year subordinated liabilities ofJSC “Moskommertsbank” in the amount of20 million US dollars with coupon rate 10%.

The share of individual’s deposits decreasedfrom 36.3% as at the end of 2005 to 28.5% as at theend of 2006 from total volume of customerdeposits due to advance growth rates of corporatecustomer deposits. In accordance with strategyconcerning retail customers the Bank believes,that by providing a wider range of services andwider services as electronic banking, credit anddebit cards, payrolls services, public utilities pay-ment, asset management, moreover, insuranceproducts for individuals, there is a strong abilityto attract more customers and to improve capaci-ties for providing services.

In 2006, the concentration of 20 largest cus-tomer deposits of the Bank increased up to 44.4%of total volume of customers deposits, compared

ii.16


ii.17



Top 20 largest depositors

graph 14

20

04

30

.7

24

.5

44

.4

20

05

20

06

%

The sand-dune sings only in some certain conditions.Only clean quarts sand can produce sounds, at that thegrains should be 0.3–0.5 mm in diameter. Sand doeskeep silence in wet weather, after rains

Capitalization

The total capitalization of the Bankincreased by the end of 2006 up to 9.9 billion USdollars (compared to 116.7% as at the end of2005). This increase occurred as a result ofgrowth in long-term borrowings (by 105%), sub-ordinated debt (by 58.2%), and also equity capitalby 222.7%. The growth in equity capital tookplace mainly as a result of IPO performance anddomestic placement of the Bank’s shares (138.6billion KZT), and capitalization of current profits(27.8 billion KZT). chart 1

The Bank’s equity capital, calculated for the pur-poses of securing capital adequacy, as at 31December 2006 amounted to 327.1 billion tenge(including Tier I capital to 270.4 billion KZT). Theincrease of equity capital during the year of 2006amounted to 144.6% (or by 193.3 billion KZT). TheBank’s Tier I capital adequacy ratio and the Bank’stotal capital adequacy ratio, calculated according tothe Basel Accord, as at 31 December 2006 amountedto 12.45% and 15.05% respectively (as at 31 December2005—to 11.02% and 14.38% respectively). graph 1

ii.18


ii.19



As at 31 December

Liabilities

Long-term liabilities 7.349.370 3.585.184 933.370 480.343

Subordinated long term debts 608.228 384.431 77.245 51.506

Total liabilities 7.957.598 3.969.615 1.010.615 531.849

Equity capital

Common shares 45.252 27.989 5.747 3.750

Preference shares 9.827 9.300 1.248 1.246

Chartered capital 55.079 37.289 6.995 4.996

Shares premiums 1.201.055 118.689 152.534 15.902

Reserves from revaluation 19.181 11.345 2.436 1.520

Reserves from income 682.591 439.446 86.689 58.877

Total equity capital 1.957.906 606.769 248.654 81.295

Total capitalization 9.915.504 4.576.384 1.259.269 613.144

Thousand US dollars Million KZT

20

06

20

05

20

06

20

05

chart 1

Charter Capital and provisions’structure for the year ended 2006

graph 1

20

04

20

05

20

06

Million KZT

15

.0%

50

10

0

75

00

0

25

0 0

00

14

.37

% 15

.7%

Total charter capital and provisionsCapital adequacy


Period ended 31 December

Assets Million KZT % Million KZT %

Loans and deposits to financial institutions (net) 110.681 5.78 93.017 4.13

Loans and deposits to financial institutions 111.285 5.75 93.488 4.11in KZT 22.037 3.72 7.343 3.98in foreign currency 89.248 6.25 86.145 4.12

Provisions for loans (604) — (471) —in KZT (35) — (146) —in foreign currency (569) — (325) —

Correspondent account with NBK 62.933 — 8.073 —in KZT 55.257 — 5.611 —in foreign currency 7.676 — 2.462 —

Securities 155.115 5.80 79.989 5.92in KZT 44.680 6.05 36.514 4.11in foreign currency 110.435 5.70 43.475 7.43

Loans to customers (net) 965.170 13.65 547.371 14.09

dividends on loans 996.623 13.22 559.749 13.78in KZT 267.517 13.46 157.763 13.94in foreign currency 729.106 13.13 401.986 13.72

non-performing and overdue 18.738 — 20.462 —in KZT 5.988 — 6.743 —in foreign currency 12.750 — 13.719 —

Provisions for loans (50.192) — (32.840) —in KZT (15.832) — (10.830) —in foreign currency (34.360) — (22.010) —

Cash and balances 18.441 — 12.904 —in KZT 9.452 — 6.634 —in foreign currency 8.990 — 6.270 —

NOSTRO accounts 14.917 0.88 10.710 0.76in KZT 1.547 0.00 1.048 0.00in foreign currency 13.370 0.98 9.662 0.84

Fixed and intangible assets after amortization revaluation 13.817 — 9.252 —in KZT 12.380 — 8.442 —in foreign currency 1.437 — 810 —

Goodwill 2.405 — 254 —in KZT 2.405 — 254 —in foreign currency — — — —

Investments 637 — 328 —in KZT 637 — 328 —in foreign currency — — — —

Other assets 39.479 — 20.682 —in KZT 14.926 — 9.371 —in foreign currency 24.553 — 11.311 —

Total 1.383.595 10.64 782.580 10.96in KZT 420.960 9.39 229.075 10.38in foreign currency 962.635 11.19 553.505 11.20

Average Averagevolume Interest rate volume Interest rate

20

05

20

06

chart 2

ii.20


ii.21



Period ended 31 December

Liabilities and charter capital Million KZT % Million KZT %

customer demand deposits 113.642 0.13 74.115 0.32in KZT 76.963 0.15 44.897 0.36in foreign currency 36.679 0.08 29.218 0.25

customer time deposits 266.606 6.72 158.225 6.40in KZT 163.124 7.95 62.161 8.03in foreign currency 103.482 4.79 96.064 5.35

LORO accounts 7.968 0.13 3.200 0.31in KZT 4.397 0.19 2.480 0.37in foreign currency 3.571 0.06 720 0.07

Short-term bank to bank loans 85.382 6.00 22.289 4.19in KZT 1.624 4.42 3.755 2.53in foreign currency 83.758 6.03 18.534 4.53

Long-term borrowing from banks and financial institutions 256.272 6.51 160.664 6.03in KZT 3.213 5.88 2.939 5.97in foreign currency 253.059 6.52 157.725 6.03

Other borrowed funds 58.164 6.9 12.270 6.22in KZT 188 2,17 243 3.01in foreign currency 57.976 6.91 12.027 6.29

Securities issued 412.954 9.34 242.428 9.66in KZT 15.931 7.39 10.409 7.31in foreign currency 397.023 9.42 232.019 9.77

Other liabilities 47.688 — 32.759 —in KZT 25.201 — 15.273 —in foreign currency 22.487 — 17.486 —

TOTAL liabilities 1.248.676 6.61 705.950 6.40in KZT 290.641 5.00 142.157 4.36in foreign currency 958.035 7.09 563.793 6.91

Charter capital and Funds 8.817 — 6.271 —in KZT 1.134 — — —in foreign currency 7.683 — 6.271 —

Minority interest 126.102 — 70.359 —in KZT 126.102 — 70.359 —in foreign currency — — — —

Total 1.383.595 5.96 782.580 5.77in KZT 417.877 3.48 212.516 2.92in foreign currency 965.718 7.04 570.064 6.84KZT /US dollars average exchange rate 126.12 — 132.87 —

Average Averagevolume Interest rate volume Interest rate

20

05

20

06

chart 3

Results of the Bank's operations for the year 2006 compared to the year 2005, million KZT

Net interest income 31.248 22.719 37.5

Net non-interest income 28.967 14.567 98.9

Operating incomes 60.215 37.286 61.5

Operating expenses (18.039) (13.368) 34.9

Insurance provision formation and provisions on devaluation of other operations (383) (880) (56. 5)

Securities provision formation and other off-balance debts (1.548) (1.059) 46.2

Income from associates 1.130 174 549.4

Income before taxation 41.375 22.153 86.8

Income tax (11.789) (2.338) 404.2

Net profit 29.586 19.815 49.3

Related to:Associated Share holders 27.810 18.392 51.2Minority interest 1.776 1.423 24.8

Profit ratioROA 2.1% 2.5%ROE 22.1% 26.1%

20

06

20

05

сh

an

ge

, %

chart 4

As of 2006, the associated company related incomeamounted to 27.810 million KZT, which is 51.2%higher comparing to 2005. High level of incomecompared to the last year is primarily resulted fromnet interest income and net non-interest incomeincrease in 2006; the growth is by 37.5% and by98.9%, respectively, compared to 2005. chart 5

Net interest income in 2006 increases to 31.248 mil-lion tenge and had grown by 37.5% in comparison to2005. This increase became possible on account of thegrowth of average volumes of the Bank’s assets bearinginterest income by 70.4% and the growth of their cost

Net interest incomecompared to the year 2005, million KZT

Interest income 147,250 86,407 70.4

Interest expense (83,115) (45,855) 81.3

Net interest income before provisionon devaluation of interest-bearing assets 64,135 40,552 58.2

Provision on devaluation of interest-bearing assets (32,887) (17,833) 84.4

Net interest income 31,248 22,719 37.5

20

06

20

05

сh

an

ge

, %

chart 5

from 11.73% to 11.82%. The factor of net interest marginafter formation of provisions for devaluation of interestassets towards average interest assets decreased a littlefrom 3.1% in 2005 to 2.5% in 2006. Such decrease ismainly stipulated by the growth of average cost of inter-est-bearing liabilities from 6.71% within the year of2005 to 6.78% within the year of 2006.

Net interest income before formation of provi-sions for devaluation of interest assets increasedby 58.2% up to 64.135 million tenge in comparisonto 40.552 million tenge in 2005. The factor of netinterest margin before formation of provisionstowards average interest assets decreased from5.5% in 2005 to 5.1% in 2006. graph 2, 3, 4

Interest income for the year of 2005 increased by70.4% or by 60.843 million tenge and came to147.250 million tenge against 86.407 million tengefor the year of 2005. This increase is connected to thegrowth of average interest-bearing assets by 70.4%and small growth of their cost from 11.73% for 2005up to 11.82% for 2006. Thus average volume of inter-est-bearing assets for 2006 came to 1.246 billiontenge in comparison with 731 billion tenge for 2005.

Basic growth took place as a result of interest incomeon customer loans , despite the fact that its share in thestructure of interest income remained on the samelevel with the last year and came to 88.6% (in compari-son to 88.3% in 2005). The growth of interest income onloans to customers by 71.1% is stipulated by sufficientincrease of average volume of loans issued to cus-tomers (gross) from 580 billion tenge for the year of2005 to 1.015 billion tenge for 2006. The growth ofaverage volume of loans to customers (gross) came to435 billion tenge or 75 %. In the structure of averageinterest assets loans to customers continue to keep themajor part, their share for the year of 2006 came to77.5% in comparison to 74.9% in 2005. Interest incomeon loans to customers issued by agreements of reverseREPO in the structure of interest income on loansissued to customer occupy insignificant share (1.0%and 0.8% for 2006 and 2005, respectively).


ii.23



graph 2

22

.719

20

05

40

.55

2

17

.79

8

20

04

29

.02

0

64

.13

5

31.2

48

20

06

million

tenge

graph 3

20

04

6.1

13

.75

3.1

1

2.5

1

5.5

5

5.1

5

20

05

20

06

%

Interest margin before provisions / average assetsInterest margin after provisions / average assets

graph 4

20

04

12

6

5.8 5

6 6.9 7

12

12

20

05

20

06

%

Interest rate on assetsInterest rate on liabilitiesNet interest margin (before provisions)

Interest margin before provisionsInterest margin after provisions

Average net interest margin The growth of interest income on loans issued tobanks came to 76.6% from 3.962 million tenge in2005 to 6.994 million tenge in 2006, its share in thestructure of interest income did not change and cameto 4.7% (in comparison to 4.6% in 2005). The growthby 3.033 million tenge (by 1.8 times) took place as aresult of the growth of average interest rates from4.11% for 2005 up to 5.75% for 2006 and the increaseof average volume of loans issued to clients (gross) by17.8 billion tenge or by 19% in comparison with theyear of 2005. Average volume of loans issued to banks(gross) for 2006 came to 111.3 billion tenge in com-parison to 93.5 billion tenge for the year of 2005. Theshare of interest income on loans issued to banks byagreements of reverse REPO in the structure of loaninterest income increased from 1% in 2005 up to 6.6%for the year of 2006.

Interest income on marketable securities for theyear of 2006 increased up to 7.183 million tengefrom 4.087 million tenge for the year of 2005. Thegrowth was stipulated by the increase of averagevolume of securities portfolio for the year of 2006 by

Interest income and average interest-bearing assets of the Bank

Net-income, KZT million Average profitability, % annually

Foreign ForeignKZT currency KZT currency

Interests income on loans to customers 130.468 76.256 71.1 13.16 12.9 13.37 13.26interests income on loans and advances to bank( incl. reverse REPO operations) 1.351 608 122.2Interests income on loans to customers 129.117 75.648 70.7

Interests income on loans to banks 6.994 3.961 76.6 3.72 6.25 3.98 4.12Interests income on loans to banks 6.532 3.923 66.5interests income on loans and advances to bank(incl. reverse REPO operations) 462 38 1115.8

Interests on marketable securities 7.183 4.087 75.8 6.05 5.7 4.11 7.43

Amortization of discount on loans 2.605 2.103 23.9

Interest income, total 147.250 86.407 70.4 12.13 11.71 11.99 11.64

20

06

20

06

20

05

сh

an

ge

, %

chart 6

20

05

75.1 billion tenge (by 1.9 times) in comparison to theyear of 2005. This increase took place despite thereduction of average interest rates from 5.92% in2005 to 5.80% in 2006. The share of interest incomeon trade securities almost did not change for theyear of 2006 in the interest income structure andcame to 4.9% (in comparison to 4.7% in 2005). chart 7

Interest expenses for the year of 2006 increasedby 81.3% in comparison to 2005, or by 37.3 billionKZT. This increase is connected to the growth ofaverage volumes of interest-bearing liabilities ofthe Bank by 78.4% in comparison to the last yearand also by the growth of their cost by 6.71% forthe year of 2005 up to 6.87% for the year of 2006.Thus, the average volume of interest-bearing lia-bilities of the Bank for the year of 2006 amountedto 1.201 billion tenge in comparison to 673 billiontenge for the year of 2005.

ii.24


ii.25



The issue of debt securities is the main componentof the Bank’s total average interest-bearing liabilitiesstructure. Their share in average interest-bearing lia-bilities in 2006 decreased to 34.4% in comparison to36% in 2005. Ratio of customers’ accounts in 2006decreased to 31.7% in comparison to 34.5% in 2005. Inconformity with the change of structure of averagevolume of interest-bearing liabilities the structure ofinterest expenses also changed. The share of interestexpenses on issued debt securities in total volume ofinterest expenses for 2006 is 44% against 48.3% for2005; the share of interest expenses on customeraccounts is 24.2% against 25.5% in 2005.

Interest expenses on issued debt securities for theyear of 2006 comprise substantial share (44%) in inter-est expenses structure. They increased by 14.5 billiontenge, or by 65.4% in comparison to the year of 2005.The growth took place mainly as a result of new issuesof euro notes in November 2005 in the amount of 500million US dollars with a coupon rate of 8%, 3-yeareuro liabilities in exotic currency (Singapore dollars)in the amount of 100 million Singapore dollars withcoupon rate 4.25% in February 2006, euro liabilities ineuro in the amount of 300 million 5-year euro with thecoupon 5.125% in March 2006, in November 2006 inthe amount of 500 million US dollars with the couponof 7.5% for 10 years term. The average volume ofissued debt securities for the year of 2006 increases by170.5 billion tenge, or by 70.3% in comparison to aver-age volume for the year of 2005.

Despite the decrease of interest expenses shareon customers’ accounts for the year of 2006 theexpenses amount increased by 72.2% (by 8.4 billionKZT) and came to 20,132 million tenge in compari-son to 11,689 million tenge for the year of 2005. Theincrease was stipulated by the growth of averagevolume of customer’ accounts for the year of 2006by 63.7% in comparison to the average volume for2005 and increase of average cost of these liabilitiesfrom 4.46% for the year of 2005 to 4.75% for 2006.

For the year of 2006 interest expenses on loansand advances from banks increased twice and came

Interest expenses and average interest- bearing liabilities of the Bank

Expenses, million KZT Average cost, % annually

Foreign ForeignKZT currency KZT currency

Interest expenses on debt securities 36.610 22.136 65.4 7.39 9.42 7.31 9.77

Interests expenses on loans and advances from banks 21.287 10.572 101.4 2.91 6.33 3.05 5.85

Interests expenses on loans and advances from banks 19.514 10.475 86.3

Interests expenses on loans and advances of banks including reverse REPO agreement 1.773 97 1727.8

Interest expenses on customers’ accounts 20.132 11.689 72.2 5.45 3.56 4.82 4.16

Interest expenses on customers’ accounts 20.034 11.649 72.0

Interest expenses on customers’ accounts including reverse REPO agreements 98 40 145.0

Interest expenses on other received advances 4.450 789 464 2.17 6.91 3.01 6.29

Dividends on preference shares 636 669 (4.9)

Interest expenses, total 83.115 45.855 81.3 5.47 7.26 4.89 7.14

20

06

20

06

20

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сh

an

ge

, %

chart 7

20

05

volume (gross) as at 31December 2006 by 2.2 times(or by 945.8 billion KZT) in comparison to the vol-ume as at 31 December 2005. Despite the growth involumes of customers’ loans, the effective provi-sions rate decreased to 4.3% as at 31December 2006in comparison with 5.5% as at the end of 2005. It isdue to improvement of general economic situationin Kazakhstan and also to general improvement ofquality of the Bank’s loan portfolio.

Average volume of formed provisions for cus-tomer loan losses for the year of 2006 came to50.192 million tenge in comparison with 32.840million tenge during the year of 2005. The growthby 17.352 billion tenge or by 52.8% took place owingto increase of average volumes of performing loansby 436.9 billion tenge or by 78%. The share of aver-age overdue loans in total average loan portfolio forthe year of 2006 came to 1.8% against 3.5% in 2005.

For the year of 2006 provision for loan to banks loss-es amounted to 390 million tenge in comparison withexpenses accrual in the amount of 712 million tengefor the year of 2005. It became possible owing to to thefact, that accounting policy of the Bank on chargingprovisions for loans to the banks members of OECDunderwent some changes. In 2005, 2% of provisionswere accrued for these loans, in 2006—zero. chart 9

Net non-interest income for the year of 2006amounted to 28.967 million tenge and increased by98.9% from 14.567 million tenge for the year of 2005.Net fee income continued to be the major part of netnon-interest income. Their share in 2006 amounted to54.8% in comparison with 64.6% in 2005. The share ofincome from marketable seсurities through incomeand losses increased from 5.8% for the year of 2005 upto 15.7% for the year of 2006. The share of income onforeign exchange, securities and precious metals oper-ation also increased from 10.9% up to 18.7% in 2006.

Fee income. Fee income increased by 64.1% from10.684 million tenge in 2005 up to 17.537 milliontenge in 2006. This increase took place as a result of

ii.27

to 21.287 million tenge in comparison to 10.572million tenge for the year of 2005. It can beexplained by the increase of average volume of bor-rowings from banks and financial institutions by87.8% (or by 163.5 billion KZT) during the year of2006 in comparison to average volumes for the yearof 2005 under concurrent increase of average inter-est rates from 5.71% for 2005 up to 6.24% for 2006.

Interest expenses on other received advancesincreased for the year of 2006 by 5.6 times and came to4.459 million tenge in comparison to 789 million tengefor the year of 2005. It is stipulated first of all by interestspayment under securitized obligations, issued by theBank in the amount of 300 million US dollars inDecember 2005, in the amount of 200 million US dol-lars in June 2006 and also due to growth by 4.7 times ofaverage volume of other received advances for the yearof 2006 in comparison to the year of 2005. chart 8

In the year of 2006 the provision for devaluation oninterest-bearing assets came to 32.887 million tengeagainst 17.833 million tenge in 2005 (growth by84.4%).

For the year of 2006 the expenses on provisionsfor customers’ loan losses amounted to 33.277 mil-lion tenge in comparison to 17.121 million tenge forthe year of 2005. The growth by 94.4% is stipulatedfirst of all by the sufficient increase of loan portfolio

ii.26

jsc kazkommertsbank annual report | 2006 jsc kazkommertsbank annual report | 2006


Provision for devaluation on interest-bearing assetsPeriod ended 31 December

Million MillionKZT KZT

Provisions for losses on customer loan 33.277 17.121 94.4

Provisions for losses on loans to banks (390) 712 (154.8)

Total 32.887 17.833 84.4

Indicators of credit’s quality

Provision for devaluation on interest-bearing assets as per average volume of loans to customers (gross) 3.3% 2.95%

Provision for devaluation on interest-bearing assets / operating income t before formation of provisions for devaluation 35.3% 32.4%

20

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ge

, %

chart 8

fees increased by 4.5 times from 592 million tenge in2005 up to 2.678 million tenge in 2006. Such growth isstipulated by income received from JSC Grantum APFsubsidiary as fee on pension assets—879 million tengeand investment profit—292 million tenge in 2006.And also income received by Moskommertsbank fromsyndicated loans arrangement, which amounted to907 million KZT.

Fee expenses. Fee expenses increased by 31.8% inthe year of 2006 up to 1.672 million tenge from1.269 million tenge in 2005. The largest share (41.4%or 692 million KZT) in total amount of fees paid com-prise fees on bank cards service, which in compari-son to the year of 2005 increased by 47.9% due toincrease of operations volume on bank cards.Besides that, 28.3% of total fees expenses compriseexpenses on insurance activity, which in compari-son to 2005 increased by 28.8%, that is because ofrequirements on additional costs while effectinginsurance activity. Other paid fees decreased by1.4% from 141 million tenge in the year of 2006 to139 million tenge in 2005, the major share of whichcomprises the payment for rating services (92.5%).

Net income on marketable securities throughincome and losses increased by 5.4 times from 849 mil-lion tenge in 2005 up to 4.545 million tenge in 2006.This growth took place on operations with derivedfinancial instruments in foreign currency. In the firstquarter of 2006 the Bank carried out borrowings ineuro and Singapore dollars. As a result of significantstrengthening of euro and Singapore dollar during2006 there was a significant income from reappraisalof these derived financial instruments.

Within the year of 2006 net income on operationswith foreign currency, securities and precious met-als increased by 3.4 times from 1.591 million tengein the year of 2005 up to 5.403 million tenge in 2006.In the net income from dealing operations theincome share from operations with foreign curren-cy comprises 99%, or 4,392 million tenge out of4,435 million KZT. The growth of income from deal-

increased range of the Bank’s products and theincrease of total volume of the Bank’s operations.Besides , the results of work of Pension Fund andPension Assets Management Company affected theincrease of fees in 2006. The structure of fee income incomparison with 2005 did not change, still the majorshare of fees had been received for payments servicesfrom individuals and for settlement and documentaryoperations, their share amounted to 58.8% in 2006 incomparison with 69.2% in 2005. Also in 2006 the feeson cards operations increased by 54%, comparing tothe year of 2005, which is explained by further expan-sion of the Bank’s card operations. Fees on foreignexchange and securities operations increased by86.8%, or by 1.9 times in comparison with 2005. Thegrowth is generated by the increase of volume of oper-ations with non-cash foreign exchange. Other Bank’s

ii.28


ii.29



Marketable securities and investments in securities Period ended 31 December

Million KZT Share, % Million KZT Share, % Changes

Net income (loss) on marketable securities through incomeand losses 4,545 15.7 849 5.8 435.3

Net income (loss) on foreign exchange, securities and precious metals transactions 5.403 18.7 1.591 10.9 239.6

Income on services and commissions received 17.537 60.5 10.684 73.3 64.1

Expenses on services and commissions paid (1.672) (5.8) (1.269) (8.7) 31.8

Net income on trading assets 29 0.1 12 0.1 141,7

Received dividends 83 0.3 10 0.1 730

Other incomes 3.042 10.5 2.690 18.5 13.1

Net non-interest income 28.967 100.0 14.567 100.0 98.9

Net non-interest income / net income 97.9% 73.5%

Net commission income / operating incomebefore formation of provision for devaluation 17% 17.1%

Net fee income/average volume of assets 1.1% 1.2%

Net non-interest income / operating income before formation of provision for devaluation 31.1% 26.4%

20

06

20

05

chart 9

сh

an

ge

, %

tion systems, into development and implementa-tion of new banking products.

Operating expenses of the Bank increased by 34.9%in the year of 2006 in comparison to 2005 (from13.368 million tenge up to 18.039 million tengerespectively). However as a result of sufficient growthof operating income the coefficient of operatingexpenses towards operating income after accrual ofprovisions on possible loan losses in 2006 decreasedto 30.0% in comparison to 35.9% in 2005. At that,interest share of operating expenses from averageassets decreased for periods analyzed to 1.3% from1.7% respectively.

Basic part of operating expenses of the Bank arestaff costs, which in the year of 2006 comprised50.7% from total operating expenses in comparisonto 48.8% in 2005. The increase is stipulated by thegrowth of the number (+40% to the last year, mainlydue to enlarging of subsidiary network) and increasein salaries in accordance with market conditions.

In the year of 2006 amortization deductionsincreased by 17.2% and came to 1.833 million tengecompared to 1.564 million tenge in 2005. Thisincrease is connected to the Bank’s investments intocustomer service network. Thus, the volume of aver-age fixed and non-tangible assets in the year of 2005increased by 49.3% in comparison to the volumes in2004.

Current expenses for maintenance of fixed assets,which include expenses on maintenance and repairof owned and rented buildings, furniture, comput-ers and other equipment, on maintenance of soft-ware, expenses for property insurance, rent andsecurity of premises, in the year of 2006 came to2.183 million tenge compared to 1.475 milliontenge in 2005, having increased by 48%.

Taxes and dues paid by the Bank for the years2006 are higher than in the last year, increase by33.8%. In total amount of these expenses 52.5%comprises the value added tax, 33%—fees intoKazakhstan Investments Guarantee Fund (of insur-ance) and 14.5%— other taxes and dues.

ing operations with foreign currency came to 2.2times or the increase from 2,019 million tenge up to4,392 million KZT. The income growth in the year of2006 in comparison to 2005 can be explained by theincrease of dealing operations volume in 3.9 times.

Received dividends. In the year of 2006 the Bankreceived dividends on the stocks of the trade securi-ties portfolio in the amount of 83 million tenge (stocksof Kazakhtelecom, Kaztsink, JSC UKTMP) in compari-son to 10 million tenge in 2005 (stocks of Kazakhmys).

Net income on withdrawal of investments avail-able for sale increased by 2.4 times from 12 milliontenge in 2005 up to 29 million tenge in 2006.

Other income. In the year of 2006 the Bank receivedother income in the amount of 3.042 million tengeagainst 2.690 million tenge in 2005, the growth cameto 13.1%. Insurance premiums of JSC “KazkommertsPolicy” are the major article of other income, despitethe fact that their share in other income decreased andcame to 80.6% in 2006 in comparison to 89% in 2005.Insurance premiums increased from 2.394 milliontenge in 2005 up to 2.451 million tenge in 2006(growth by 2.4%), which in the Bank’s opinion is aresult of continuing development of Kazakhstaninsurance market.

The Bank continues to expand and improve itsperformance in accordance with international stan-dards, this requires significant investments intodevelopment of subsidiary network, staff, informa-

ii.30


ii.31



Operating expenses

Staff cost 9.154 50.7 6.517 48.8

Amortization costs 1.833 10.2 1.564 11.7

Maintenance of buildings, transport and other fixed assets 2.183 12.1 1.475 11.0

Taxes and fees, insurance premiums 1.219 6.8 911 6.8

Advertising costs 1.038 5.8 587 4.4

Telecommunications costs 476 2.6 367 2.7

Travel costs 323 1.8 256 1.9

Other expenses 1.813 10.0 1.691 12.7

Operating expenses, total 18.039 100.0 13.368 100.0

Million KZT Ratio, % Million KZT Ratio, %

20

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20

06

chart 10

Advertising costs increased by 76.8% from 587 mil-lion tenge in the year of 2005 up to 1.038 milliontenge in 2006 due to the Bank’s advertising campaignto promote its banking products during the year.

The increase of operations in the capital marketand also regional development generated thegrowth of communication and travel expenses by28.2% towards the previous year. graph 5

Taxation. The statutory corporate tax rate inKazakhstan is 30%. Tax costs increased by 5 timesin 2006 and came to 11.789 million tenge in com-parison to 2.338 million tenge for the similar year2005. Effective tax rate for the year of 2006 came to28.5% in comparison with 10.6% in 2005. Thegrowth of effective tax rate within the year of 2006in comparison with 2005 is explained by:

First of all, in 2005 there was a correction on theyear of 2004 effected for the amount of 1.6 billiontenge (return due to re-submission of declarationfor the year of 2004). Without taking into consider-ation this correction the effective tax rate for theyear of 2005 was 17.8%;

Second, to cancellation of preferences on invest-ment loans (loans for purchase, construction andimprovement of fixed assets) in 2006 and decreaseof the Government’s securities share in securitiesportfolio of the Bank from 29 billion tenge in 2005to 13 billion tenge in 2006.

It is necessary to point out that the Government isintended to cancel all preferences on taxation andbring all groups of tax payers to equal conditions.

ii.32



Operating expenses efficiency

graph 5

2,6

1,8 1,7

1,3

32

.2%

32

.9%43

.8%

53

.7%

33

.0%

35

.9%

30

.0%

33

.1%

million KZT 2003 2004 2005 2006

% of net interest incomebefore provisions% of operating incomeafter provisions Operating expenses to average assets, %

Social Report

part iii

Tyan-ShanfoothillsLatitude 54-12-38

North

Longitude 112-61-22

East

The idea of social cor po ra te res pon si bi li ty of Kazkommertsbank was rea -liz ed through some proj ects car ri ed out by Charity Fund “Kus Zholy”in 2006.

The Fund “Kus Zholy” published the first finan cial report about its cha ri -ty acti vi ty in the lea ding repu bli can newspa per “KazakhstanskayaPravda”. The Fund is going to pro ce ed with this prac ti ce along withannu al audi ting of its finan cial acti vi ty.


jsc kazkommertsbank

iii.01


Development Strategy

The Kazakhstan society development strategy is to improve the leader-ship skills, as these skills should be a characteristic feature of the nation, to pro-vide opportunities to use them. All this is being reflected in the regional socialprojects. At the same time with development of its subsidiary network, KKB car-ried out programs addressed to cooperation with local governmental authoritiesand regional mass media in order to ensure that the Fund’s charity activity meetsregional expectations.

Project “Look at stars…”Disabled people whose life credo is to live full life work despite any difficulties

took part in this project! The Project has been realized in cooperation with the regional newspapers.

Personal grants were awarded to 66 people out of 197 applied to participate in theProject. Some of those people were from really remoted provincial places. Six per-sons obtained additional grants for successful use of the grants. The total amount ofgrants was 3,720,000 KZT.

What the Project’s participants say: Sergey Ponomaryov, Aktobe: “A lot of disabled people would like to do some-

thing on their own. One can feel as a normal person, having a specific goal and try-ing to achieve it.”

Valentina Nastevich, Kostanai: “The main result of this Project is not only afinancial support but also the fact that our society began to care of disabled peoples’problem and encourage them developing proper opportunities to arrange theirown business.”

Tatyana Vasilenko, Pavlodar, Project Manager: “These people live a normal fulllife. They do not resign from destiny but try to make their hobby their purpose of life.”

Year 2006 passed as a year of development of social partnership with various non-profit, governmental and independent non-governmental organizations. The pur-pose for this was to improve quality of social charity projects. Grant policy for edu-cation has increased and covered both traditional support to State NationalConservatory named after Kurmangazy for example, and also support to manyregional and capital universities and colleges. Some talented students now study-ing in Russia were covered by the grant policy as well.

For instance, Student’s Symphony Orchestra of the Conservatory named afterKurmangazy participated in symphony music festival contest in Shaushpil,Germany.

Traveling Grants Program—is intended for talented children under 18 andfor disabled people.

45 people visited various countries in 2006. Successful performance was demon-strated by children’s group “Domrochka” from Karaganda (contest held in Dobrich,Bulgaria) and vocal school “Alliance” from Semipalatinsk (contest in Anapa, Russia)as well as children from Almaty choreographic school, all of them won the contests.Along with the above, a real world’s sensation became a performance of Madina

KKB is a Kazakhstan registered company and its main professional goal is to suc-cessfully develop the country and its citizens. This year the Fund has financed aproject which allowed our compatriots living in Russia to bring up their children inKazakh spirit and traditions. Thanks to this project children and young people havean opportunity to study the Kazakh language, folk arts, music, dances and be awareof Kazakh culture distinctive features.

Kazakh Sunday School

Kazakh Sunday School was opened in Moscow in order to encourage our compa-triots to study national culture and the Kazakh language.

Yelena Vyunsh, Moscommertsbank: “The School became popular even beforethe official opening day!”

KKB is a leading financial institute which not only declares but also successivelyrealizes its own social corporate commitments as a participant of UNO GlobalAgreement but also makes a great contribution in promoting charity and socialresponsibility ideas in Kazakhstan. The Fund took part in various conferencesincluding those held in foreign countries as well as in round-table discussions devot-ed to development of unified principles in business social responsibility and charity.The Fund’s representatives also participated in the Central Asian educational semi-nars where they shared their experience of social projects and reporting.

As a financial institution, KKB contributes to development of economic growthand prosperity in Kazakhstan. One of the main directions of the “Kus Zholy”Fund’s charity policy in 2006 was financial support to some independent econom-ic research works done by teachers of economics and devoted to actual economicproblems. It was a long-term, multi-phase and consistent project which providedteachers with possibilities to use worldwide electronic libraries for scientific eco-nomic know-how and consult leading foreign economists.

Project “Independent economic researches”

More than 30 researchers and teachers from different universities of Kazakhstantook part in the Project. They learnt how to conduct an independent research fromwestern colleagues. As a result, projects of 4 Kazakhstan researchers were acceptedas the best within the Central Asian region.

Within the framework of this program, Kazkommertsbank has financed 11research projects carried out by 23 researchers.

Social corporate responsibility for the Bank’s employees in 2006 was reflectedin the increased social package and opportunities for employees to realize theirtalents.

Love for all seasons By the 15th anniversary of the Bank, the employees performed and showed to a

wide audience musical “Love forever ”. The musical consisted of some ABBA songs.Within 4 months the employees had full scale rehearsals like real professionalactors. Actually, young talented people impressed the audience and proved thatthey are not worse than foreign actors of musical genre.

Roman Vorushin, Head of Financial Portal Development Unit (projectHomebank.kz) of the KKB IT Department: “Firstly I was tempted with free lessonsin choreography and vocal but later when I got to know better the musical itself andthe team, I became eager to create something good and beautiful with these won-derful people.”

Adamova, a 10-year old violinist who took the first place at the international con-test in San-Bartolomeo, Italy. Madina got 99 points out of 100 and charmed a profes-sional international jury by her excellent performance.

Yana Kasyan, Madina’s teacher: “Madina had to perform the first and she reallymanaged to become the first among young musicians. The jury members weredelighted by her performance.”

Project “Scholarship grants in Russia”

Scholarship grants were awarded in cooperation with Abai Institute at theEmbassy of the Republic of Kazakhstan in the Russian Federation to Kazakhstanstudents successfully studying at Moscow universities.

Tyan -Shan (in translation from the Chinese language means “sky mountains”)—it is a mountain chainin Central Asia situated between latitude 40 and 45 North and longitude 67 and 95 East

iii.03iii.02


jsc kazkommertsbankjsc kazkommertsbank annual report | 2006annual report | 2006

Sabina Barayeva, Leading Analyst of KKB Product Support Department: “Notevery company supports creative ideas of its employees like Kazkommertsbankdoes. Moreover, during the musical time work became easier, I also made manynew friends.”

iii.04

The Tyan-Shan consists of mountain chains which mostly lie in latitude or sub-latitude direction. Only in itscentral part—in Central Tyan-Shan, where the highest picks are Victory (7,439 m) and Khan-Tengri (6,995 m), on the board of Kazakhstan and China,—there is Meridian mountain ridge.

annual report | 2006jsc kazkommertsbank


FinancialStatements

TimerlikcanyonLatitude 54-12-38

North

Longitude 112-61-22

East

part iv

Statement of Management'sResponsibilities for the Preparationand Approval of the ConsolidatedFinancial Statements for the YearsEnded 31 December 2006 and 2005

The following statement, which should be read in conjunctionwith independent auditors’ responsibilities stated in the independentauditors’ report set out on pages 2–3, is made with a view to distinguishingthe respective responsibilities of management and those of the independ-ent auditors in relation to the consolidated financial statements of JointStock Company Kazkommertsbank and its subsidiaries (the Group).

Management is responsible for the preparation of the consolidated finan-cial statements that present fairly the financial position of the Group as at31 December 2006 and 2005, and the results of its operations, cash flows andchanges in equity for the years then ended, in accordance withInternational Financial Reporting Standards (IFRS).

In preparing the consolidated financial statements, management isresponsible for:

Selecting suitable accounting principles and applying them consistently;Making judgments and estimates that are reasonable and prudent;Stating whether IFRS have been followed, subject to any material depar-

tures disclosed and explained in the consolidated financial statements; andPreparing the consolidated financial statements on a going concern basis,

unless it is inappropriate to presume that the Group will continue in busi-ness for the foreseeable future.

Management is also responsible for:Designing, implementing and maintaining an effective and sound system

of internal controls, throughout the Group;Maintaining proper accounting records that disclose, with reasonable

accuracy at any time, the financial position of the Group, and which enablethem to ensure that the consolidated financial statements of the Groupcomply with IFRS;

Maintaining statutory accounting records in compliance with legislationand accounting standards of the Republic of Kazakhstan;

Taking such steps as are reasonably available to them to safeguard theassets of the Group; and

Detecting and preventing fraud and other irregularities.The consolidated financial statements for the years ended 31

December 2006 and 2005 were authorised for issue on 15 March 2007 bythe Management Board of JSC Kazkommertsbank.

On behalf of the Management of the Bank:

Zhussupova N.A. Shoinbekova G.K.

Chairman of the Board Chief Accountant

15 March 2007 15 March 2007Almaty Almaty

iv.01



Statement of Management’s Responsibilities for the Preparation and Approval of the Consolidated Financial Statements for the Years Ended 31 December 2006 and 2005

Independent Auditor’s Report

Consolidated Financial Statements for the Years Ended 31 December 2006 and 2005

Consolidated income statements

Consolidated balance sheets

Consolidated statements of changes in equity

Consolidated statements of cash flows

Notes to the consolidated financial statements

contents

I

II

III

Deloitte, LLPState license on auditing of the Republic of Kazakhstan Number 0000015, typeMFU-2, given by the Ministry of Finance of the Republic of Kazakhstan datedSeptember 13, 2006

Andrew Weekes Nurlan Bekenov

Engagement Partner General DirectorChartered Accountant Deloitte, LLPCertificate of Public Practice 78586, Australia

15 March 2007



Independent Auditors' Report

To the Shareholders of JSC Kazkommertsbank:Report on the consolidated financial statementsWe have audi ted the accom pa ny ing con so li da ted finan cial sta te -

ments of JSC Kazkommertsbank and its sub si di a ri es (the Group),which com prise the con so li da ted balan ce she ets as at 31 December2006 and 2005, and the con so li da ted inco me sta te ments, sta te mentsof chan ges in equ ity and cash flows sta te ments for the years thenended, and a sum ma ry of sig ni fi cant accoun ting poli ci es and otherexpla na to ry notes.

Management’s responsibility for the consolidated financial statementsManagement is res pon si ble for the pre pa ra tion and fair pres en ta -

tion of these con so li da ted finan cial sta te ments in accor dan ce withInternational Financial Reporting Standards. This res pon si bi li ty inc lu -des: des ig ning, imple men ting and main ta i ning inter nal con trol rele -vant to the pre pa ra tion and fair pres en ta tion of con so li da ted finan cialsta te ments that are free from mate ri al mis sta te ment, whether due tofraud or error; selec ting and apply ing appro pri a te accoun ting poli ci es;and making accoun ting esti ma tes that are rea so nab le in the cir cum -stan ces.

Auditors’ responsibilityOur responsibility is to express an opinion on these financial state-

ments based on our audit. We conducted our audit in accordance withInternational Standards on Auditing. Those standards require that wecomply with ethical requirements and plan and perform the audit toobtain reasonable assurance whether the consolidated financial state-ments are free from material misstatement.

An audit involves performing procedures to obtain audit evidenceabout the amounts and disclosures in the consolidated financial state-ments. The procedures selected depend on the auditor’s judgment,including the assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error. Inmaking those risk assessments, the auditor considers internal controlrelevant to the entity’s preparation and fair presentation of the consoli-dated financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressingan opinion on the effectiveness of the entity’s internal control. An auditalso includes evaluating the appropriateness of accounting policies usedand the reasonableness of accounting estimates made by management,as well as evaluating the overall presentation of the consolidated finan-cial statements.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in

all material respects, the financial position of the Group as at 31December 2006 and 2005, and its financial performance and its cashflows for the years then ended in accordance with InternationalFinancial Reporting Standards.

iv.02



When the river just comes from the mountains on the steppe area,the canyon itself represents a downfall with depth more than200 m The banks are inaccessible mountain walls

iv.04



iv.05



Consolidated income statementsfor the years ended 31 December 2006 and 2005, KZT million

Interest income 6 147,250 86,407

Interest expense 6 (83,115) (45,855)

Net interest income before provision for impairment losses on interest bearing assets 64,135 40,552

Provisions for impairment losses on interest bearing assets 7 (32,887) (17,833)

Net interest income 31,248 22,719

Net gain on financial assets at fair value though profit or loss 8 4,545 849

Net gain on foreign exchange operations 9 5,403 1,591

Fee and commission income 10 17,537 10,684

Fee and commission expense 10 (1,672) (1,269)

Net realized gain on investments available-for-sale 29 12

Dividends received 83 10

Other income 11 3,042 2,690

Net non-interest income 28,967 14,567

Operating income 60,215 37,286

Operating expenses 12 (18,039) (13,368)

Operating profit 42,176 23,918

Provision for impairment losses on other transactions 7 (383) (880)

Provision for guarantees and other off-balance sheet contingencies 7 (1,548) (1,059)

Share of results of associates 22 1,130 174

Profit before income tax 41,375 22,153

Income tax expense 13 (11,789) (2,338)

NET PROFIT 29,586 19,815

Attributable to:

Equity holders of the parent 27,810 18,392

Minority interest 1,776 1,423

Earnings per share

Basic and diluted (KZT) 14 64.83 50.95

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The Notes on pages 10–70 (part IV) form an integral part of these consolidated financial statements.

The Independent Auditors’ Report is on pages 2–3 (part IV).

Consolidated balance sheetsas at 31 December 2006 and 2005, KZT million

Assets:

Cash and balances with national (central) banks 15 209,005 37,229

Precious metals 16 807 —

Financial assets at fair value through profit or loss 17 322,618 140,375

Loans and advances to banks 18 197,191 254,287

Loans to customers 19 1,678,840 743,411

Investments available-for-sale 20 2,628 427

Investments held to maturity 21 357 562

Investments in associates 22 1,755 425

Goodwill 23 2,405 2,405

Property, equipment and intangible assets 24 15,681 8,662

Other assets 25 13,015 7,086

Total assets 2,444,302 1,194,869

Liabilities and equity

Liabilities:

Loans and advances from banks 26 884,301 379,206

Customer accounts 27 687,806 303,437

Derivative financial instruments 17 3,554 189

Debt securities issued 28 424,162 303,133

Other borrowed funds 29 68,814 50,604

Provisions 7 6,758 4,934

Deferred income tax liabilities 13 17,471 8,290

Dividends payable 1 1

Other liabilities 30 8,587 4,591

2,101,454 1,054,385

Subordinated debt 31 78,922 52,213

Total liabilities 2,180,376 1,106,598

Equity:

Equity attributable to equity holders of the parent:

Share capital 32 6,995 4,996

Share premium 32 152,534 15,902

Property and equipment revaluation reserve 2,436 1,520

Reserves 86,689 58,877

Total equity attributable to equity holders of the parent 248,654 81,295

Minority interest 15,272 6,976

Total equity 263,926 88,271

Total liabilities and equity 2,444,302 1,194,869

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iv.07iv.06





Consolidated statements of changes in equityfor the years ended 31 December 2006 and 2005 (KZT million)

Investments Total equity attributable available-for-sale fair Investments Property and equipment to equity holders

Share capital Share premium value reserve revaluation reserve revaluation reserve Retained earnings of the parent Minority interest Total equity

31 December 2004 4.197 7.864 11 (13) 1.313 40.456 53.828 5.468 59.296

Share capital increase ofordinary shares 289 4.142 — — — — 4.431 — 4.431preference shares 512 3.915 — — — — 4.427 — 4.427

Repurchase of own shares (2) (19) — — — — (21) — (21)

Property and equipment revaluation — — — — 232 — 232 — 232

Depreciation of property and equipment revaluation reserve — — — — (25) 25 — — —

Unrealized gains on revaluation of available-for-sale investments — — 1 — — — 1 — 1

Gains transferred to income statement on sale of available-for-sale investments — — (11) — — — (11) — (11)

Effect of purchase of interest in Accumulation Pension Fund JSC ABN AMRO KaspiyMunaiGaz — — — — — — — 126 126

Exchange differences on translation of foreign operations — — — 16 — — 16 (41) (25)

Net profit — — — — — 18.392 18.392 1.423 19.815

31 December 2005 4.996 15.902 1 3 1.520 58.873 81.295 6.976 88.271

Share capital increase ofordinary shares 2.000 136.890 — — — — 138.890 — 138.890

Repurchase of own shares (1) (258) — — — — (259) — (259)

Property and equipment revaluation — — — — 948 — 948 — 948

Depreciation of property and equipment revaluation reserve — — — — (32) 32 — — —

Unrealized gains on revaluation of available-for-sale investments — — 68 — — — 68 — 68

Gains transferred to income statement on sale of available-for-sale investments — — (29) — — — (29) — (29)

Exchange differences on translation of foreign operations — — — 73 — (142) (69) 6.520 6.451

Net profit — — — — — 27.810 27.810 1.776 29.586

31 December 2006 6.995 152.534 40 76 2.436 86.573 248.654 15.272 263.926







Interest paid and received by the Group in cash during the year ended31 December 2006 amounted to KZT 75,112 million and KZT 127,355million, respectively.

Interest paid and received by the Group in cash during the year ended31 December 2005 amounted to KZT 40,709 million and KZT 81,440 mil-lion, respectively.





iv.09iv.08





Consolidated statements of cash flowsfor the years ended 31 December 2006 and 2005, (KZT million)

Cash flows from operating activities:


Adjustments for:

Provision for impairment losses on interest bearing assets 7 32,887 17,833

Provision for reserves for impairment losses on other transactions 7 383 880

Provision for guarantees and other off-balance contingencies 7 1,548 1,059

Unrealised gain and amortisation of discounts on securities (363) (1,439)

Amortization of discount on issued securities 156 500

Depreciation and amortization 12, 24 1,833 1,564

Change in interest accruals, net 25,966 1,434

Unrealized exchange loss 2,855 276

Share of results of associates 22 (1,130) (174)

Net gain on sale of property, equipment and intangible assets 11 (17) (28)

Net change in fair value of financial assets at fair value through profit or loss 10,371 96

Cash flows from operating activities before changes in operating assets and liabilities 115,864 44,154

Changes in operating assets and liabilities (Increase)/decrease in operating assets:

Minimum reserve deposit with Central Bank of Russian Federation (1,072) 142

Loans and advances to banks (84,218) (38,337)

Precious metals (807) —

Financial assets at fair value through profit or loss (183,671) (63,491)

Loans to customers (928,684) (254,007)

Other assets (5,018) 3,475

Increase/(decrease) in operating liabilities:

Loans and advances from banks 401,197 149,542

Customer accounts 422,316 133,686

Other borrowed funds 18,200 45,971

Other liabilities 2,357 1,722

Cash (outflow)/inflow from operating activities before taxation (243,536) 22,857

Income tax paid (2,369) (2,082)

Net cash (outflow)/inflow from operating activities (245,905) 20,775

Cash flows from investing activities:

Purchase of property, equipment and intangible assets 24 (7,715) (2,566)

Proceeds on sale of property, equipment and intangible assets 193 135

Dividends received — 10

Net proceeds on (purchase)/sale of investments available-for-sale (2,394) 519

Net proceeds on redemption of investments held to maturity 211 4

Acquisition of investments in associates 22 (200) (33)

Acquisition from subsidiaries, net of cash acquired of entities — (3,389)

Net cash outflow from investing activities (9,905) (5,320)

Cash flows from financing activities:

Issue of ordinary share capital 138,890 4,431

Issue of preference share capital — 4,427

Proceeds from debt securities issued 113,157 95,731

Redemption of debt securities issued — (2,480)

Subordinated debt 25,680 28,751

Repurchase of own shares (259) (21)

Dividends paid (636) (669)

Net cash inflow from financing activities 276,832 130,170

Net increase in cash and cash equivalents 21,022 145,625

Cash and cash equivalents, beginning of year 15 227,476 81,858

Effect of changes in foreign exchange rate on cash and cash equivalents 718 (7)

Cash and cash equivalents, end of year 15 249,216 227,476

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ers of MKB on the acquisition of 52.11% interest in the share capital ofMKB and on obtaining remaining 47.89% interest in trust management.At present time permission on acquisition was received from the Agencyof the Republic of Kazakhstan on regulation and supervision of thefinancial market and financial organizations (AFN). Related documenta-tion was sent to the regulatory bodies of the Russian Federation.Expected date of obtaining permission from the regulatory bodies of theRussian Federation is March of 2007, while acquisition of interest inshare capital of MKB is expected to take place in April of 2007.

JSC Kazkommerts Securities is a joint-stock company and operatesunder laws of the Republic of Kazakhstan since 1997. The Company’sprimary business consists of trading with securities, including brokerand dealing operations, consulting in investments and corporatefinances, organization of issues, allocation and underwriting of securi-ties, and purchase and sale of securities in the capacity of the agent. TheCompany has license No.0401200324 dated 27 November 2000 issued bythe National Bank of the Republic of Kazakhstan. In 2005, the Companyreceived license for investment portfolio management No.0403200363dated 30 September 2005 issued by the National Bank of the Republic ofKazakhstan.

JSC Insurance Company Kazkommerts-Policy is a joint-stock companyand operates under laws of the Republic of Kazakhstan since 1996. Thecompany’s primary business consists of insurance of property, cargoes,auto insurance, civil liability insurance of vehicle owners, insurance ofother civil liabilities and reinsurance. The Company has licenses on vol-untary insurance services No.13-8/1 DOS dated 1 July 2005 and on oblig-atory insurance services No.13-8/1 OS dated 1 July 2005 issued by theNational Bank of the Republic of Kazakhstan.

JSC Kazkommertsbank Kyrgyzstan is a joint-stock bank and operatesunder laws of the Kyrgyz Republic since 1991. The Bank’s operations areregulated by the National Bank of the Kyrgyz Republic according tolicense No.010. The Bank’s primary business consists of commercialbanking activities, acceptance of deposits from individuals, transfer ofpayments, issue of loans, operations with foreign exchange and deriva-tive instruments, originating loans and guarantees.

JSC Kazkommerts Life is a joint-stock company and operates underlaws of the Republic of Kazakhstan. The Company’s primary businessconsists of life insurance. The Company has a license on life insuranceservices No.42-1/1 dated 28 December 2006 issued by the AFN and 28December 2006 is determined to be the date of commencement of oper-ations.

LLP Processing Company is a limited liability partnership and operatesunder laws of the Republic of Kazakhstan since 9 July 2004. The Companyis registered with the Ministry of Justice of the Republic of Kazakhstanunder No.64313-1910-ТОО. The Company’s primary business is to pro-vide payment card and related services.

Kazkommerts International B.V. is a limited liability partnership (B.V.)and operates under laws of the Kingdom of Netherlands since 1 October1997. The Company was established for the primary purpose of raisingfunds for the Bank at foreign capital markets. The Company has licenseNo.24278506 dated 1 October 1997 for raising funds, including issuanceof bonds and other securities, and entering into agreements regardingthose activities issued by the Chamber of Commerce of Netherlands.

Kazkommerts Finance II B.V. is a limited liability partnership (B.V.) andoperates under laws of the Kingdom of Netherlands since 13 February 2001.The Company was established for the primary purpose of raising funds forthe Bank at foreign capital markets. The Company has license No.24317181dated 13 February 2001 for conducting separate types of banking and othertypes of operations issued by the Chamber of Commerce of Netherlands.

Kazkommerts Capital II B.V. is a limited liability partnership (B.V.) andoperates under laws of the Kingdom of Netherlands since 11 April 2000.

iv.11



Notes to the consolidated financial statements for the years ended 31 December2006 and 2005

1. OrganisationJSC Kazkommertsbank (the Bank or Kazkommertsbank) is a joint-

stock bank and operates in the Republic of Kazakhstan since 1990. TheBank conducts its operations under the license No.48 issued by theNational Bank of the Republic of Kazakhstan (NBRK). The Bank’s pri-mary business consists of commercial banking activities, operationswith securities, foreign currencies and derivative instruments, originat-ing loans and guarantees.

The registered office of the Bank is located at: 135Zh, Gagarin str.,Almaty, Republic of Kazakhstan.

The Bank has 22 branches in the Republic of Kazakhstan, and a repre-sentative office in London (Great Britain) and Dushanbe (Tajikistan).

Kazkommertsbank is a parent company of the banking group (theGroup) which consists of the following enterprises consolidated in thefinancial statements:

Notwithstanding Kazkommertsbank had no ownership in the sharecapital of LLP Moskommertsbank (MKB), a commercial bank in theRussian Federation. MKB was included in the consolidated financialstatements of the Group since the Bank was able to and exercised effec-tive control over its activity. The control assumed a possibility forKazkommertsbank to issue loans to customers of MKB and receiveincome from such activity. In 2003, shareholders of MKB andKazkommertsbank entered into agreements of trust management of60.04% interest in the share capital of MKB. At the same time betweenshareholders of MKB owning 39.96% interest in the share capital of MKBand Kazkommertsbank there is an agreement on segregation of respon-sibility regarding management of MKB providing for non-involvementof these shareholders in the policy of the activity of MKB determined byKazkommertsbank. In September 2006, Kazkommertsbank and share-holders of MKB cancelled the agreements of trust management for 2.6%interest in the share capital of MKB, decreasing the trust managementfrom 60.04% to 57.44%. In the 4th quarter of 2006 MKB increased its char-ter capital by 750 million Russian roubles (KZT 3,608 million at averageexchange rate effective in 4th quarter of 2006) and additional paid-incapital by 562.5 million Russian roubles (KZT 2,706 million at averageexchange rate effective in the 4th quarter of 2006). On 15 December2006, the Board of Directors of Kazkommertsbank approved an infor-mal agreement between Kazkommertsbank and the existing sharehold-

iv.10



Name Country of operation The Bank ownership interest Type of operation

JSC Kazkommerts Securities Securities market Republic of Kazakhstan 100% 100% transactions

Payment cardLLP Processing Company Republic of Kazakhstan 100% 100% and related services

Kazkommerts Raising funds for the BankInternational B.V. Kingdom of Netherlands 100% 100% on international capital markets

Raising funds for the Bank on international capital

Kazkommerts Finance II B.V. Kingdom of Netherlands 100% 100% markets

Raising funds for the Bank on international capital

Kazkommerts Capital II B.V. Kingdom of Netherlands 100% 100% markets

JSC OCOPAIM Grantum Investment managementAsset Management Republic of Kazakhstan 100% 100% of pension assets

JSC Kazkommerts Life Republic of Kazakhstan 100% — Life insurance

JSC Kazkommertsbank Kyrgyzstan Kyrgyz Republic 93.58% 93.58% Commercial bank

JSC Grantum APF Republic of Kazakhstan 80.01% 80.01% Pension fund

JSC Insurance Company Kazkommerts-Policy Republic of Kazakhstan 65% 65% Insurance

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chart 1

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05

As at 31 December 2006, the following shareholders owned the issuedshares of the Bank:

These consolidated financial statements were authorized for issue bythe Bank’s Management Board on 15 March 2007.

2. Basis of presentationAccounting basisThese consolidated financial statements of the Group have been pre-

pared in accordance with International Financial Reporting Standards(IFRS) issued by the International Accounting Standards Board (IASB)and Interpretations issued by the International Financial ReportingInterpretations Committee (IFRIC).

These financial statements are presented in millions of Kazakhstantenge (KZT million or mln tenge), unless otherwise indicated. Thesefinancial statements have been prepared under the historical cost con-vention, except for the measurement at fair value of certain financialinstruments and measurement of land and buildings at revaluedamounts according to International Accounting Standard (IAS) 16“Property, Plant and Equipment”.

Kazkommertsbank and its subsidiaries in the Republic of Kazakhstanmaintain its accounting records in accordance with IFRS, while its for-eign subsidiaries maintain accounting records in accordance with therequirements of their countries of residence where subsidiaries operate.These consolidated financial statements have been prepared based onthe accounting records of Kazkommertsbank and its subsidiaries, andhave been adjusted to conform to IFRS.

The Company was established for the primary purpose of raising fundsfor the Bank at foreign capital markets. The Company has licenseNo.24305284 dated 11 April 2000 for conducting operations issued bythe Chamber of Commerce of Netherlands.

In October 2005, Kazkommertsbank acquired from JSC DB ABN AMROBank 100% shares in a pension assets management company—JSC OCO-PAIM ABN AMRO Asset Management Kazakhstan (the ABN AM) and 80.01%shares in the Accumulation Pension Fund JSC ABN AMRO KaspiyMunaiGaz(the ABN APF) (see Note 23). In the agreement with the seller, ABN APF andABN AM received new names, JSC Grantum APF and JSC OCOPAIMGrantum Asset Management (Grantum PAMC), respectively.

Grantum PAMC is a joint-stock company and operates under laws ofthe Republic of Kazakhstan since 1998. The Company’s primary busi-ness consists of investment management of pension assets. TheCompany has a license on investment management of pension assetsNo.0412200149 dated 18 August 2004 issued by the AFN, license oninvestment portfolio management No.0403200199 dated 18 August2004 issued by the AFN, and license on broker/dealer activity at the stockmarket without the right to maintain customer accountsNo.0402200216 dated 18 August 2004.

Grantum APF is a joint-stock company and operates since 1998 underlaws of the Republic of Kazakhstan. The Company’s primary businessconsists of attraction of pension contributions of depositors and makingpension payments to recipients under laws of the Republic ofKazakhstan. The Company operates based on the state license on attrac-tion of pension contributions and making pension paymentsNo.0000019 dated 22 January 2004, issued by the AFN.

iv.13





Gradually the mountains give place to sedimentary rocks, whichpreviously have been the bottom of the ancient sea

The following shareholders owned the issued shares of the BankAs at 31 December 2006

JSC Central-Asian Investment Company 2 184,679,013 32.1

European Bank of Reconstruction and Development 48,909,043 8.5

Bank of New York 260,934,622 45.4

Directors and Management Board members 199,213,086 34.6

Nurzhan Subkhanberdin 169,229,894 29.4

Direct 72,570,672 12.6

Indirect 96,659,222 16.8

Nina Zhussupova (indirect) 29,983,192 5.2

Other shareholders

JSC Central-Asian Investment Company (excluding the interests in it of Mr. Subkhanberdin and Ms. Zhussupova) 78,377,681 13.7

Other direct shareholders 8,055,350 1.4

Total 574,837,398 100

Sh

ar

es

chart 2

% 1

1 As at 31 December 2006, the number of issued common shares of Kazkommertsbank amounted to574,837,398. JSC Central-Asian Investment Company, European Bank of Reconstruction andDevelopment, N. Subkhanberdin and other direct shareholders constitute direct shareholders ofKazkommertsbank.

2 АJSC Central-Asian Investment Company (CAIC) is one of the entities through which the Directors andManagement Board members own shares of Kazkommertsbank. As at 31 December 2006 CAIC held184,679,013 shares of Kazkommertsbank. At the same date N. Subkhanberdin held 44.8% of shares ofCAIC, and N. Zhussupova held 12.8% of shares of CAIC. The table above also includes holdings in theform of GDR of N. Subkhanberdin and N. Zhussupova.

These consolidated financial statements were authorized for issue by the Bank’s Management Board on

15 March 2007.

assets and liabilities, both monetary and non-monetary, of the foreignentity are translated at closing rate;

income and expense items of the foreign entity are translated at theaverage exchange rate for the period;

all resulting exchange differences are classified in equity until the dis-posal of the investment;

on disposal of the investment in the foreign entity, related exchangedifferences are recognized in the income statement.

All intra-group transactions, balances, income and expenses are elim-inated on consolidation.

Investments in associatesAn associate is an entity over which the Group is in a position to exer-

cise significant influence, but not control.The results and assets and liabilities of associates are incorporated in

these financial statements using the equity method of accounting.Investments in associates are carried in the balance sheet at cost as

adjusted by post-acquisition changes in the Group’s share of the netassets of the associate, less any impairment in the value of individualinvestments. Losses of the associates in excess of the Group’s interest inthose associates are not recognized.

Any excess of the cost of acquisition over the Group’s share of the fairvalues of the identifiable net assets of the associate at the date of acqui-sition is recognized as goodwill. Any deficiency of the cost of acquisitionbelow the Group’s share of the fair values of the identifiable net assets ofthe associate at the date of acquisition (i.e. discount on acquisition) isrecorded in the income statement in the period of acquisition.

Where a group company transacts with an associate of the Group,profits and losses are eliminated to the extent of the Bank’s interest inthe relevant associate. Losses may provide evidence of an impairment ofthe asset transferred in which case appropriate provision is made forimpairment.

As at 31 December 2006 fair value of investments, assets, liabilities,revenue and income of associated companies for the year then endedare presented as follows:

As at 31 December 2005 fair value of investments, assets, liabilities,revenue and income of associated companies for the year then endedare presented as follows:

GoodwillGoodwill arising on consolidation represents the excess of the cost of

acquisition over the Bank’s interest in the fair value of the identifiableassets and liabilities of a subsidiary, associate or jointly controlled enti-ty at the date of acquisition.

3. Significant accounting policiesBasis of consolidationThe consolidated financial statements incorporate the financial state-

ments of Kazkommertsbank and entities controlled by the Bank madeup to 31 December each year. Control is achieved where the Bank hasthe power to govern the financial and operating policies of an investeeentity so as to obtain benefits from its activities.

On acquisition, the assets (including identifiable intangible assets),liabilities and contingent liabilities of a subsidiary are measured attheir fair values at the date of acquisition. Any excess of the cost ofacquisition over the fair values of the identifiable net assets acquired isrecognised as goodwill. Any deficiency of the cost of acquisition belowthe fair values of the identifiable net assets acquired (i.e. discount onacquisition) is credited to income statement in the period of acquisi-tion. The minority interest is stated at the minority’s proportion of thefair values of the assets and liabilities recognised. Subsequently, anylosses applicable to the minority interest in excess of the minorityinterest are allocated against the interests of the parent. The equityattributable to equity holders of the parent and net income attributableto minority shareholders’ interests are shown separately in the balancesheet and income statement, respectively. For a business combinationinvolving entities or business under common control all assets and lia-bilities of a subsidiary are measured at their carrying values recorded inthe stand-alone financial statements of the subsidiary with the differ-ence between the carrying value of the share in net assets of the sub-sidiary and the cost of acquisition recorded directly in equity attributa-ble to the equity holders of the parent.

The results of subsidiaries acquired or disposed during the year areincluded in the consolidated income statement from the effective dateof acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into the line withthose used by the Bank.

In translating the financial statements of a foreign subsidiary intothe presentation currency for incorporation in the consolidatedfinancial statements, the Bank follows a translation policy in accor-dance with International Accounting Standard 21 “The Effects ofChanges in Foreign Exchange Rates” and the following proceduresare done:

iv.15





Landscape diversity is stipulated by a variety of the flora and thefauna. There are Asiatic poplars, bushes, heavy bed growing alongthe river, and among all these specific fauna can be found

As at 31 December 2006 (KZT million)

Fair value of investments Total assets Total liabilities Revenue

Name of associated in associated of associated of associated of associatedcompany company company company company Profit

JSC APF Ular Umit 725 2,568 778 3,469 806

JSC OCOPAIM Zhetysu Asset Management Company 993 1,995 10 1,483 823

chart 3

As at 31 December 2006 (KZT million)

Fair value of investments Total assets Total liabilities Revenue

Name of associated in associated of associated of associated of associatedcompany company company company company Profit

JSC APF Ular Umit 388 1,136 195 2,189 422

chart 4

Loans and advances to banksIn the normal course of business, the Group maintains advances or

deposits for various periods of time with other banks. Loans andadvances to banks with a fixed maturity term are subsequently meas-ured at amortized cost using the effective interest rate method. Thosethat do not have fixed maturities are carried at cost. Loans and advancesto banks are carried net of any allowance for impairment losses.

Financial assets and liabilities at fair value through profit or loss Financial assets and liabilities at fair value through profit or loss repre-

sent derivative instruments or securities acquired principally for thepurpose of selling them in the near future, or are a part of portfolio ofidentified financial instruments that are managed together and forwhich there is evidence of a recent and actual pattern of short-term profittaking of securities that upon initial recognition are designated by theGroup at fair value through profit or loss. Financial assets and liabilitiesat fair value through profit or loss are initially recorded and subsequent-ly measured at fair value. The bank uses quoted market prices to deter-mine fair value for financial assets and liabilities at fair value throughprofit or loss. Fair value adjustment on financial assets and liabilities isrecognized in the consolidated income statement at net gain on finan-



The Bank tests goodwill for impairment quarterly.If the Bank’s interest in the net fair value of the identifiable assets, lia-

bilities and contingent liabilities exceeds the cost of the business combi-nation, the Bank:

reassesses the identification and measurement of the Bank’s identifi-able assets, liabilities and contingent liabilities and the measurement ofthe cost of the combination;

recognizes immediately in profit or loss any excess of the value of iden-tifiable assets, liabilities and contingencies over the acquisition valueremaining after that reassessment on the date of acquisition.

On disposal of a subsidiary, associate or jointly controlled entity, theattributable amount of goodwill is included in the determination of theprofit or loss on disposal.

Investments in other subsidiaries and associatesInvestments in corporate shares where the Group owns more than

20% of share capital, but does not have ability or intent to control orexercise significant influence over operating and financial policies, ornon-consolidation of such companies does not significantly affect thefinancial statements of the Group as a whole, as well as investments incorporate shares where the Bank owns less than 20% of share capital, areaccounted for at fair value or at approximate fair value. If such value can-not be estimated, investments are accounted for at cost. Managementperiodically assesses realizability of the carrying values of such invest-ments and provides valuation allowances, if necessary. Such invest-ments are accounted for as investments available-for-sale.

Recognition and measurement of financial instrumentsThe Group recognizes financial assets and liabilities on its balance

sheet when it becomes a party to the contractual obligation of theinstrument. Regular way purchase and sale of the financial assets andliabilities are recognized using settlement date accounting. Regular waypurchases of financial instruments that will be subsequently measuredat fair value between trade date and settlement date are accounted for inthe same way as for acquired instruments.

Financial assets and liabilities are initially recognized at fair valueplus, in the case of a financial asset or financial liability not at fair valuethrough profit or loss transaction costs that are directly attributable toacquisition or issue of the financial asset or financial liability. Theaccounting policies for subsequent re-measurement of these items aredisclosed in the respective accounting policies set out below.

Cash and balances with national (central) banksCash and balances with national (central) banks are basically cash and

cash equivalents and include cash on hand, unrestricted balances on corre-spondent and time deposit accounts with the National Bank of the Republicof Kazakhstan, the Central Bank of the Russian Federation, and the NationalBank of the Kyrgyz Republic with original maturity within 90 days, andadvances to banks in countries included in the Organization for EconomicCo-operation and Development (OECD), except for margin deposits foroperations with plastic cards, which may be converted to cash within ashort period of time. For purposes of determining cash flows, the minimumreserve deposit required by the Central Bank of the Russian Federation isnot included in cash equivalents due to restrictions on its availability.

Precious metals Assets denominated in precious metals are translated at the current

rate computed based on the second fixing of the London Metal Exchangerates using the KZT/USD exchange rate effective at the date. Changes inthe bid prices are recorded in net gain/(loss) on operations with preciousmetals in other income in the consolidated income statement.

iv.16



Steep walls of the canyon, columns and arches are 150–300 m high.Ash trees, retained from the Ice period, do guard the canyon

cial assets at fair value through profit or loss. The Group does not reclas-sify financial instruments in or out of this category while they are held.

The Group enters into derivative financial instruments to manage cur-rency and liquidity risks. Derivative financial instruments include for-wards on foreign currency, precious metals and securities, and swaps.The Group does not apply hedge accounting.

Repurchase and reverse repurchase agreements The Group enters into sale and purchase back agreements (repos) and

purchase and sale back agreements (reverse repos) in the normal courseof its business. Repos and reverse repos are utilized by the Group as anelement of its treasury management and trading business.

A repo is an agreement to transfer a financial asset to another party inexchange for cash or other consideration and a concurrent obligation toreacquire the financial assets at a future date for an amount equal to thecash or other consideration exchanged plus interest. These agreementsare accounted for as financing transactions. Financial assets sold underrepurchase agreements are retained in the consolidated financial state-ments and consideration received under these agreements is recordedas loans and advances from banks and customer accounts.

Assets purchased under reverse repurchase agreements are recordedin the consolidated financial statements as loans and advances to banksand loans to customers which are collaterized by securities and otherassets.

In the event that assets purchased under reverse repo are sold to thethird parties, the results are recorded with the gain or loss included innet gains/(losses) on respective assets. Any related income or expensearising from the pricing difference between purchase and sale of theunderlying assets is recognized as interest income or expense.

iv.18



Loans to customers Loans originated by the Group are financial assets that are created by

the Group by providing money directly to a borrower or by participatingin a syndicated loan.

Loans granted by the Group with fixed maturities are initially recog-nized at fair value plus initial direct costs and fees that are integral to theinterest rate. For loans issued at lower than market terms the differencebetween the nominal amount of consideration given and the presentvalue of future cash flows discounted at market rate at inception is rec-ognized in the consolidated income statement in the period the loan isissued as losses on origination of assets. Subsequently, the carryingamount of such loans is adjusted for amortization of the losses on origi-nation and the related income is recorded as interest income using theeffective interest method. Loans to customers that do not have fixedmaturities are carried at cost. Loans to customers are carried net of anyallowance for impairment losses.

Write-off of loans and advances Loans and advances to banks and customers are written off against

allowance for impairment losses in case of uncollectibility of loans andadvances, including through repossession of collateral. Loans andadvances are written off after management has exercised all possibili-ties available to collect amounts due to the Group and after the Grouphas sold all available collateral. The decision on writing off bad debtagainst allowance for impairment losses for all major, preferential,unsecured and insider loans should necessarily be confirmed with a pro-cedural document of judicial or notary bodies certifying that at the timeof the decision the debt could not be repaid (partially repaid) with thedebtor’s funds.

iv.19



The canyon is divided into perpendicular to the river gorges.They are completely separate from each other and accessible fromwater or from above

ers in determining whether it has objective evidence that an impairmentloss has been incurred include information about the debtors’ or issuers’liquidity, solvency, business and financial risk exposures, levels of andtrends in delinquencies for similar financial assets, national and localeconomic trends and conditions, and the fair value of collateral and guar-antees. These and other factors may, either individually or taken togeth-er, provide sufficient objective evidence that an impairment loss hasbeen incurred in a financial asset or group of financial assets.

It should be understood that estimates of losses involve an exercise ofjudgment. While it is possible that in particular periods the Group may sus-tain losses, which are substantial relative to the allowance for impairmentlosses, it is the judgment of management that the allowance for impair-ment losses is adequate to absorb probable losses incurred on the risk assets.

Finance leases Financial leases are leases that transfer substantially all the risks and

rewards incident to ownership of an asset. Title may or may not eventu-ally be transferred. Whether a lease is a finance lease or an operatinglease depends on the substance of the transaction rather than the formof the contract. The lease is classified as finance lease if:

The lease transfers ownership of the asset to the lessee by the end ofthe lease term.

The lessee has the option to purchase the asset at a price which isexpected to be sufficiently lower than the fair value at the date theoption becomes exercisable such that, at the inception of the lease, it isreasonably certain that the option will be exercised.

The lease term is for the major part of the economic life of the asseteven if title is not transferred.

At the inception of the lease the present value of the minimum leasepayments amounts to at least substantially all of the fair value of theleased asset.

The leased assets are of a specialized nature such that only the lesseecan use them without major modifications being made.

The Group as a lessor presents finance leases as loans and initially meas-ures them in the amount equal to net investment in the lease. Subsequentlythe recognition of finance income is based on a pattern reflecting a constantperiodic rate of return on the Group’s net investment in the finance lease.

Investments held to maturity Investments held to maturity are debt securities with determinable or

fixed payments. The Group has the positive intent and ability to hold themto maturity. Such securities are carried at amortized cost, less anyallowance for impairment. Amortized discounts are recognized in interestincome over the period to maturity using the effective interest method.

Investments available-for-sale Investments available-for-sale represent debt and equity investments

that are intended to be held for an indefinite period of time. Such secu-rities are initially recorded at fair value, which amounts to the purchasevalue. Subsequently the securities are measured at fair value, with suchre-measurement recognized directly in equity. The Group uses quotedmarket prices to determine the fair value for the Group’s investmentsavailable-for-sale. If the market for investments is not active, the man-agement’s valuation is used. Interest income on debt investments is rec-ognized in the consolidated income statement as interest income oninvestments in securities. Dividends received on equity investments areincluded in dividend income in the consolidated income statement.

When there is objective evidence that such securities have beenimpaired, the cumulative loss previously recognized in equity is removedfrom equity and recognized in the income statement for the period.Reversals of such impairment losses on debt instruments, which are objec-

Non-accrual loans Once a financial asset or a group of similar financial assets has been writ-

ten down (partly written down) as a result of an impairment loss, interestincome is thereafter recognized using the rate of interest to discount thefuture cash flows for the purpose of measuring the impairment loss.

Allowance for impairment losses The Group establishes an allowance for impairment losses of financial

assets when there is objective evidence that a financial asset or group offinancial assets is impaired. The allowance for impairment losses is meas-ured as the difference between carrying amounts and the present value ofexpected future cash flows, including amounts recoverable from guaran-tees and collateral, discounted at the financial asset’s original effectiveinterest rate, for financial assets which are carried at amortized cost. If in asubsequent period the amount of the impairment loss decreases and thedecrease can be related objectively to an event occurring after the impair-ment was recognized, the previously recognized impairment loss isreversed by adjustment of an allowance account. For financial assets carriedat cost the allowance for impairment losses is measured as the differencebetween the carrying amount of the financial asset and the present value ofestimated future cash flows discounted at the current market rate of returnfor a similar financial asset. Such impairment losses are not reversed.

The determination of the allowance for impairment losses is based onan analysis of the risk assets and reflects the amount which, in the judg-ment of management, is adequate to provide for losses incurred.Provisions are made as a result of an individual appraisal of risk assets forfinancial assets that are individually significant, and an individual or col-lective assessment for financial assets that are not individually significant.

The change in the allowance for impairment losses is charged to profitand the total of the allowance for impairment losses is deducted in arriv-ing at assets as shown in the balance sheet. Factors that the Group consid-

iv.21





Fantastic, strange forms of the mountains do resemble mythicsculptures. The names of the artists who created all these things arewind, water and sand

using tax rates that have been enacted or substantively enacted by thebalance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differ-ences between the carrying amounts of assets and liabilities in the finan-cial statements and the corresponding tax bases used in the computa-tion of taxable profit, and is accounted for using the balance sheet liabil-ity method. Deferred tax liabilities are generally recognized for all tax-able temporary differences and deferred tax assets are recognized to theextent that it is probable that taxable profits will be available againstwhich deductible temporary differences can be utilized. Such assets andliabilities are not recognized if the temporary difference arises fromgoodwill or from the initial recognition (other than in a business combi-nation) of other assets and liabilities in a transaction that affects neitherthe tax profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differencesarising on investments in subsidiaries and associates, and interests injoint ventures, except when the Group is able to control the reversal of thetemporary difference and it is probable that the temporary difference willnot reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balancesheet date and reduced to the extent that it is no longer probable thatsufficient taxable profits will be available to allow all or part of the assetto be recovered.

Deferred tax is calculated at the tax rates that are expected to apply inthe period when the liability is settled or the asset is realized. Deferredtax is charged or credited in the consolidated income statement, exceptwhen it relates to items charged or credited directly to equity, in whichcase the deferred tax is also dealt with in equity.

Countries where the Group operates also have various other taxes,which are assessed on the Group’s activities. These taxes are included as acomponent of operating expenses in the consolidated income statement.



tively related to events occurring after the impairment, are recognized inthe income statement for the period. Reversals of such impairment losseson equity instruments are not recognized in the income statement.

Property, equipment and intangible assets Property and equipment, except for buildings and other real estate

and construction, and intangible assets are carried at historical cost lessaccumulated depreciation. Buildings and other real estate and construc-tion are carried at market value. Depreciation on assets under construc-tion and those not placed in service commences from the date the assetsare ready for their intended use.

Depreciation of property, equipment and intangible assets is chargedon the carrying value of property and equipment and is designed towrite off assets over their useful economic lives. It is calculated on astraight line basis at the following annual prescribed rates:

The carrying amounts of property, equipment and intangible assets arereviewed at each balance sheet date to assess whether they are recorded inexcess of their recoverable amounts, and where carrying values exceed thisestimated recoverable amount, assets are written down to their recoverableamount. An impairment is recognized in the respective period and is includ-ed in operating expenses. After the recognition of an impairment loss thedepreciation charge for property, equipment and intangible assets is adjust-ed in future periods to allocate the assets’ revised carrying value, less itsresidual value (if any), on a systematic basis over its remaining useful life.

Buildings and other real estate and construction held for use in supply ofservices, or for administrative purposes, are stated in the balance sheet attheir revalued amounts, being the fair value at the date of revaluation, deter-mined from market-based evidence by appraisal undertaken by professionalvaluers, less any subsequent accumulated depreciation and subsequentaccumulated impairment losses. Revaluations are performed with sufficientregularity such that the carrying amount does not differ materially from thatwhich would be determined using fair values at the balance sheet date.

Any revaluation increase arising on the revaluation of such land andbuildings is credited to the property and equipment revaluation reserve,except to the extent that it reverses a revaluation decrease for the same assetpreviously recognized as an expense, in which case the increase is creditedto the income statement to the extent of the decrease previously charged.A decrease in carrying amount arising on the revaluation of such buildingsand other real estate or construction is charged as an expense to the extentthat it exceeds the balance, if any, held in the property and equipment reval-uation reserve relating to a previous revaluation of that asset.

Depreciation on revalued buildings is charged to the income state-ment. On the subsequent sale or retirement of a revalued property, theattributable revaluation surplus remaining in the properties revalua-tion reserve is transferred directly to retained earnings.

Taxation Income tax expense represents the sum of the current and deferred

tax expense. The current tax expense is based on taxable profit for the year. Taxable

profit differs from net profit as reported in the income statementbecause it excludes items of income or expense that are taxable ordeductible in other years and it further excludes items that are nevertaxable or deductible. The Group’s current tax expense is calculated

iv.22



Fantastic shapes, appearing due to destruction process and wind,do form a picturesque country of mysterious sculptures

Buildings and other real estate 1–5

Furniture and equipment 8–33

Intangible assets 15–33

%

lished for the difference. Such losses are evaluated based on the finan-cial position of the customer, compliance with the changes of the con-tracts and business conditions.

Contingent assets Contingent assets from received financial guarantees appear when

the Group has indications of a loss as a result of a specific debtor’s failureto make a timely payment on initial or amended terms of the debtinstrument. The contingent asset arises where an economic profit canbe received. If it is actually clear that the inflow of economic benefitincreases, the asset and related income are reflected in the financialstatements of the period, when changes take place.

Share capital and share premiumShare capital is recognized at historic cost. Share premium represents

the excess of contributions over the nominal value of the shares issued.Gains and losses on sales of treasury stock are charged or credited toshare premium.

External costs directly attributable to the issue of new shares, otherthan on a business combination, are deducted from equity net of anyrelated income taxes.

Dividends on ordinary shares are recognized in equity as a reductionin the period in which they are declared. Dividends that are declaredafter the balance sheet date are treated as a subsequent event underInternational Accounting Standard 10 “Events after the Balance SheetDate” (IAS 10) and disclosed accordingly.

Preference sharesPreference shares having a prescribed dividend amount are considered

to be compound financial instruments in accordance with the substanceof the contractual arrangement and accordingly the liability and equitycomponents are presented separately in the balance sheet. On initialrecognition the equity component is assigned the residual amount afterdeducting from the initial carrying amount of the instrument as a wholethe fair value determined for the liability component. The fair value of theliability component on initial recognition is estimated by discountingexpected future cash flows at a market interest rate for a comparable debtinstrument. Subsequently the liability component is measured accordingto the same principles used for subordinated debt, and the equity compo-nent is measured according to the same principles used for share capital.

Retirement and other benefit obligations In accordance with the requirements of the legislation of the countries in

which the Bank and its subsidiaries operate, the Group withholds pensioncontributions from employee wages and transfers them to pension funds.The existing state pension systems provide for the calculation of currentpayments by the employer as a percentage of current total payments tostaff. This expense is charged in the period the related salaries are earned.Upon retirement all retirement benefit payments are made by pensionfunds selected by employees. The Group does not have any pensionarrangements separate from the state pension system of the countries inwhich the Group operates. In addition, the Group has no post-retirementbenefits or other significant compensated benefits requiring accrual.

Recognition of income and expense Interest income and expense are recognized on an accrual basis using

the effective interest method. The effective interest method is a methodof calculating the amortized cost of a financial asset or a financial liabil-ity (or group of financial assets or financial liabilities) and of allocatingthe interest income or interest expense over the relevant period. Theeffective interest rate is the rate that exactly discounts estimated future

Deposits from banks and customers Customer and banks deposits are initially recognized at fair value,

which amounts to the issue proceeds less transaction costs incurred.Subsequently amounts due are stated at amortized cost and any differ-ence between net proceeds and the redemption value is recognized inthe consolidated income statement over the period of the borrowingsusing the effective interest method.

Debt securities issuedDebt securities issued represent promissory notes, eurobonds and

bonds issued by the Group. They are accounted for according to thesame principles used for customer and banks deposits.

Subordinated debt Subordinated debt is initially recognized at fair value, which usually

amounts to the net proceeds from the issue, less directly attributabletransaction expenses incurred. Subsequently, these liabilities are meas-ured at amortized cost and any difference between net proceeds and theredemption value is recognized in the income statement over the periodof the borrowing using the effective interest method.

Provisions Provisions are recognized when the Group has a present legal or con-

structive obligation as a result of past events, and it is probable that an out-flow of resources embodying economic benefits will be required to settlethe obligation and a reliable estimate of the obligation can be made.

Guarantees and letters of credit Guarantees and letters of credit are initially recognized at fair value.

Subsequently they are measured at the amortized cost taking intoaccount commission received or paid equally during the effective periodof the instrument. Guarantees issued are evaluated regularly and in caseof excess of assessed loss over the carrying value, the provision is estab-

iv.25





Million layers of red sandstone, uncovered due to continuous winderosion, form unearthly landscape. Rocky mountains are extremelybeautiful in the rays of the sundown

The methods for determining such estimates and establishing theresulting reserves are continuously reviewed and updated. Resultingadjustments are reflected in current income.

Reinsurance In the ordinary course of business, the Group cedes reinsurance. Such

reinsurance arrangements provide for greater diversification of busi-ness, allow management to control exposure to potential losses arisingfrom legal risks and provide additional capacity for growth.

Reinsurance assets include balances due from reinsurance companiesfor paid and unpaid losses and loss adjustment expenses, and cededunearned premiums. Amounts receivable from reinsurers are estimatedin a manner consistent with the claim liability associated with the rein-sured policy. Reinsurance is recorded gross unless a right of offset existsand is included in the accompanying consolidated balance sheets withinother assets.

Reinsurance contracts are assessed to ensure that underwriting risk,defined as the reasonable possibility of significant loss, and timing risk,defined as the reasonable possibility of a significant variation in the tim-ing of cash flows, are transferred by the Group to the reinsurer.

Foreign currency translationMonetary assets and liabilities denominated in foreign currencies are

translated into KZT at the appropriate spot rates of exchange ruling atthe balance sheet date. Foreign currency transactions are accounted forat the exchange rates prevailing at the date of the transaction. Profitsand losses arising from these translations are included in net gain on for-eign exchange operations.



cash payments or receipts through the expected life of the financialinstrument or, when appropriate, a shorter period to the net carryingamount of the financial asset or financial liability.

Once a financial asset or a group of similar financial assets has been writ-ten down (partly written down) as a result of an impairment loss, interestincome is thereafter recognized using the rate of interest used to discountthe future cash flows for the purpose of measuring the impairment loss.

Interest income also includes income earned on investments in secu-rities. Other income is credited to income statement when the relatedtransactions are completed.

Loan origination fees are deferred, together with the related directcosts, and recognized as an adjustment to the effective interest rate ofthe loan. Where it is probable that a loan commitment will lead to a spe-cific lending arrangement, the loan commitment fees are deferred,together with the related direct costs, and recognized as an adjustmentto the effective interest rate of the resulting loan. Where it is unlikelythat a loan commitment will lead to a specific lending arrangement, theloan commitment fees are recognized in the consolidated profit and lossover the remaining period of the loan commitment. Where a loan com-mitment expires without resulting in a loan, the loan commitment feeis recognized in the consolidated profit and loss on expiry. Loan servic-ing fees are recognized as revenue as the services are provided. Loan syn-dication fees are recognized in the consolidated profit and loss when thesyndication has been completed. All other commissions are recognizedwhen services are provided.

Underwriting incomeUnderwriting income includes net written insurance premiums

and commissions earned on ceded reinsurance reduced by the netchange in the unearned premium reserve, claims paid, the provisionof insurance losses and loss adjustment expenses, and policy acquisi-tion cost.

Net written insurance premiums represent gross written premiumsless premiums ceded to reinsurers. Upon inception of a contract, premi-ums are recorded as written and are earned on a pro rata basis over theterm of the related policy coverage. The unearned premium reserve rep-resents the portion of the premiums written relating to the unexpiredterms of coverage and is included within other assets in the accompany-ing consolidated balance sheet.

Losses and loss adjustments are charged to the consolidated profit andloss accounts as incurred through the reassessment of the reserve forlosses and loss adjustment expenses.

Commissions earned on ceded reinsurance contracts are recorded asincome at the date the reinsurance contract is written and deemedenforceable.

Policy acquisition costs, comprising commissions paid to insuranceagents and brokers, which vary with and are directly related to the pro-duction of new business, are deferred, recorded in the accompanyingconsolidated balance sheet within other assets, and are amortized overthe period in which the related written premiums are earned.

Reserve for insurance losses and loss adjustment expensesThe reserve for insurance losses and loss adjustment expenses is includ-

ed in the accompanying consolidated balance sheets within reserves andis based on the estimated amount payable on claims reported prior to thebalance sheet date, which have not yet been settled, and an estimate ofincurred but not reported claims relating to the reporting period.

Due to the absence of prior experience, the reserve for incurred butnot reported claims (IBNR) was established as being equal to the expect-ed loss ratio for each line of business times the value of coverage, less thelosses actually reported.

iv.26



Exceptional ruggedness of the landscape does amaze, a great num-ber of hollows and gorges do create disorderly network. The heightof the mountain walls, columns and arches of the canyon canbe from 150 to 300 m

IFRS 7 “Financial Instruments: Disclosures” (effective 1 January 2007);Amendments to IAS 1 regarding disclosure on the objectives, policies

and processes for managing capital (effective 1 January 2007).The management is currently assessing the impact of the adoption of

these new and revised Standards and Interpretations in future periods.

4. ReclassificationsCertain reclassifications have been made to the consolidated financial

statements as at 31 December 2005 and for the year then ended to con-form to the presentation as at 31 December 2006 and for the year thenended as current year presentation provides a better view of the finan-cial position of the Group.

In particular, securities purchased under reverse repurchase agree-ment have been included as loans and advances to banks and loans tocustomers and securities sold under repurchase agreements have beenincluded as loans and advances from banks and customer accounts.

5. AcquisitionOn 01 November 2006 the Group acquired 50% share in JSC OCOPAIM

Zhetysu Asset Management Company. As of 31 December 2006 the Group has not consolidated JSC OCOPAIM

Zhetysu Asset Management Company as Kazkommertsbank does nothave the power to govern the financial and operating policies of thecompany so as to obtain benefits from its activities.



Rates of exchangeThe exchange rates at year-end used by the Group in the preparation

of the consolidated financial statements are as follows:

Offsetting of financial assets and liabilities Financial assets and liabilities are offset and reported net on the balance

sheet when the Group has a legally enforceable right to set off the recog-nized amounts and the Group intends either to settle on a net basis or torealize the asset and settle the liability simultaneously. In accounting fora transfer of a financial asset that does not qualify for derecognition, theGroup does not offset the transferred asset and the associated liability.

Fiduciary activities The Group provides trustee services to its customers. Also the Group

provides depositary services to its customers. Assets accepted and liabil-ities incurred under the fiduciary activities are not included in theGroup’s financial statements. The Group accepts the operational risk onthese activities, but the Group’s customers bear the credit and marketrisks associated with such operations.

Segment reporting A segment is a distinguishable component of the Group that is engaged

either in providing products or services (business segment) or in provid-ing products or services within a particular economic environment (geo-graphical segment), which is subject to risks and rewards that are differ-ent from those of other segments. Segments with a majority of revenueearned from sales to external customers and whose revenue, result orassets are ten per cent or more of all the segments are reported separate-ly. Geographical segments of the Group have not been reported separate-ly within these consolidated financial statements since the managementof the Group believes that the main segment is the Commonwealth ofIndependent States (CIS), including the Republic of Kazakhstan, which ischaracterized by similar risks and profitability. In addition, over 90% ofthe Group’s operations are conducted within the CIS.

Adoption of new and revised International Financial Reporting StandardsIn 2006 the following interpretations and amendments applicable to

the Bank became effective: IFRIC 4 “Determining Whether an Arrangement Contains a Lease”

(effective 1 January 2006);IFRIC 8 “Scope of IFRS 2” (effective 1 May 2006); IFRIC 9 “Reassessment of Embedded Derivatives” (effective 1 June

2006);Amendment to IAS 39 regarding the financial guarantee contracts

(effective 1 January 2006);Amendment to IAS 39 regarding the fair value option (effective 1

January 2006).The effect of these changes on the financial statements of the Group is

not significant. At the date of authorization of these financial statements, the follow-

ing Standards and Interpretations applicable to the Group were issuedbut not yet effective:

iv.28



This rarely picturesque place has a very varied relief and reallyamazes by its peculiarity

The consolidated financial statements31 December 2005 and 2006

KZT/1 US dollar 127.00 133.98

KZT/1 euro 167.12 158.99

KZT /1 Kyrgyz som 3.36 3.24

KZT /1 Russian rouble 4.82 4.66

20

06

20

05

chart 5

The movements in provision for guarantees and other off-balancesheet contingencies were as follows:

8. Net gain on financial assets at fair value through profit or loss Net gain on financial assets at fair value through profit or loss comprises:

9. Net gain on foreign exchange operations Net gain on foreign exchange operations comprises:

iv.31



6. Net interest income

7. Allowance for impairment losses, other provisionsThe movements in allowance for impairment losses on interest

bearing assets were as follows:

The movements in insurance provisions and allowances for impair-ment losses on other transactions were as follows:

iv.30



Year ended 31 December (KZT million)

Interest income

Interest income on loans to customers and on reverse repurchase agreements:loans to customers 129,117 75,648reverse repurchase agreements 1,351 608

Interest on debt securities 7,183 4,087

Interest income on loans and advances to banks and on reverse repurchase agreements:loans and advances to banks 6,532 3,923reverse repurchase agreements 462 38

Amortization of discount on loans 2,605 2,103

Total interest income 147,250 86,407

Interest expense

Interest on debt securities issued 36,610 22,136

Interest expense on customer accounts and repurchase agreements:customer accounts 20,034 11,649repurchase agreements 98 40

Interest expense on loans and advances from banks and repurchase agreements:loans and advances from banks 19,514 10,475repurchase agreements 1,773 97

Dividends 636 669

Interest expense on securitization program 3,744 —

Other interest expense 706 789

Total interest expense 83,115 45,855

Net interest income before provision for impairment losses on interest bearing assets 64,135 40,552

20

06

20

05

chart 6

KZT million

Loans and advances to banks Loans to customers Total

31 December 2004 533 29,879 30,412

Provision 712 17,121 17,833

Write-off of assets — (5,359) (5,359)

Recoveries of assets previously written off — 531 531

Exchange rate difference — (10) (10)

31 December 2005 1,245 42,162 43,407

(Recovery)/provision (390) 33,277 32,887

Write-off of assets (909) (909)


Exchange rate difference 2 (715) (713)

31 December 2006 857 73,936 74,793

chart 7

KZT million

Insurance provisions Other assets Total

31 December 2004 1,557 111 1,668

Provision 788 92 880

Write-off of assets — (81) (81)


Exchange difference — 3 3

31 December 2005 2,345 131 2,476

Provision 358 25 383

Write-off of assets — (39) (39)


Exchange difference — (4) (4)

31 December 2006 2,703 117 2,820

chart 8


Property 997 894

Vehicles 664 708

Civil liability for owners of vehicles 215 282

Civil liability for damage 63 64

Other 764 397

Total insurance provisions 2,703 2,345

20

06

20

05

chart 9

KZT million

1 January 2,589 1,530

Provision for the period 1,548 1,059

Exchange rate difference (82) —

31 December 4,055 2,589

Total provisions 6,758 4,934

20

06

20

05

chart 10


Trading (loss)/gain on operations with financial assets at fair value through profit or loss, netBonds (496) (87)Ordinary shares 17 68Derivative financial instruments on bonds (149) —Derivative financial instruments on foreign currency 6,553 (11)

Fair value adjustment on financial assets at fair value through profit or loss, netBonds 581 (260)Ordinary shares 919 1,247Derivative financial instruments on foreign currency (2,879) (108)Derivative financial instruments on precious metals (1) —

Total net gain on financial assets at fair value through profit or loss 4,545 849

20

06

20

05

chart 11


Dealing, net 4,435 1,869

Translation differences, net 968 (278)

Total net gain on foreign exchange operations 5,403 1,591

20

06

20

05

chart 12

13. Income taxesThe Group provides for taxes based on the tax accounts maintained

and prepared in accordance with the tax regulations of countrieswhere the Group and its subsidiaries operate and which may differfrom International Financial Reporting Standards.

The Group is subject to certain permanent tax differences due tonon-tax deductibility of certain expenses and a tax free regime for cer-tain income.

Deferred taxes reflect the net tax effects of temporary differencesbetween the carrying amounts of assets and liabilities for financialreporting purposes and the amounts used for tax purposes. Temporarydifferences as at 31 December 2006 and 2005 relate mostly to differentmethods of income and expense recognition as well as to recorded val-ues of certain assets.

Tax effect of temporary differences as at 31 December 2006 and 2005comprise:

The increase of the deferred income tax is caused by the increase indeferred tax liabilities on the asset impairment provisions by 83.6%,increase in revaluation amount of securities and derivative financialinstruments by 736.1% and increase in deferred tax liabilities on prop-erty, equipment and intangible assets by 143.5%. The increase indeferred tax liability on the asset impairment provisions was affectedby a significant increase in the loan portfolio of the Bank in 2006 of122.5%. The increase in deferred tax liability on revaluation of deriva-tive financial instruments was affected by an acute fluctuation in theexchange rate of USD to KZT and euro. The increase in deferred tax lia-bility on property, equipment and intangible assets was affected by anincrease in initial and revalued cost of fixed and intangible assets in2006 of 62.5%.

Relationships between tax expenses and accounting profit for theyears ended 31 December 2006 and 2005 are explained as follows:

iv.33



10. Fee and commission income and expenseFee and commission income and expense comprise:

11. Other income

12. Operating expenses

iv.32




Fee and commission income:Cash operations 4,896 3,446Documentary operations 3,393 2,144Foreign exchange and securities operations 2,492 1,334Settlements 2,018 1,801Plastic cards operations 1,890 1,227Encashment operations 170 140Other 2,678 592

Total fee and commission income 17,537 10,684

Fee and commission expense:Plastic cards services 692 468Insurance activity 474 368Foreign exchange and securities operations 131 105Correspondent bank services 107 77NBRK computation center services 81 82Documentary operations 48 28Other 139 141

Total fee and commission expense 1,672 1,269

20

06

20

05

chart 13


Insurance income 2,451 2,394

Fines and penalties received 89 109

Income from sale of property, equipment and intangible assets 28 28

Other 474 159

Total other income 3,042 2,690

20

06

20

05

chart 14


Staff costs 9,154 6,517

Depreciation and amortization 1,833 1,564

Lease 1,134 514

Advertising costs 1,038 587

Value added tax 640 456

Property and equipment maintenance 635 666

Communications 476 367

Payments to the Individuals’ Deposit Insurance Fund 402 311

Business trip expenses 323 256

Vehicle maintenance 210 150

Bank cards services 207 130

Security services 204 145

Taxes, other than income tax 177 144

Consulting and audit services 136 257

Charity and sponsorship expenses 98 70

Training and information services 96 95

Stationery and blanks 92 72

Representative expenses 49 45

Mail and courier expenses 43 40

Other inventories 41 37

Legal services 20 27

Cash collection expenses 15 82

Penalties and fines 14 212

Other expenses 1,002 624

Total operating expenses 18,039 13,368

20

06

20

05

chart 15


Deferred assets:Unamortized commission for loan issue 191 —Unrealized revaluation of investments 10 —Other assets 482 459

Total deferred assets 683 459

Deferred liabilities:Loans to banks and customers 13,662 7,440Property, equipment and intangible assets 1,583 650Provisions under guarantees and letters of credit 1,167 372Unrealized revaluation of investments 1,530 183Investments in associates 201 94Other liabilities 11 10

Total deferred liabilities 18,154 8,749Net deferred tax liabilities 17,471 8,290

20

06

20

05

chart 16



Tax at the statutory tax rate (30%) 12,413 6,646

Tax effect of permanent differences (624) (2,713)

Adjustment of prior periods — (1,595)

Income tax expense 11,789 2,338

Current income tax expense 3,015 1,096

Deferred income tax expense 8,774 1,242

Income tax expense 11,789 2,338

20

06

20

05

chart 17

17. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss comprise:

iv.35



14. Earnings per share

15. Cash and balances with national (central) banks

The balances with the Central Bank of the Russian Federation (CBR) asat 31 December 2006 and 2005 include KZT 1,712 million and KZT 641million, respectively, which represents the permanent minimumreserve deposits required by the Central Bank of the Russian Federation.The Group is required to maintain the reserve balance at the CentralBank of the Russian Federation at all times.

Cash and cash equivalents for the purposes of the statement of cashflows are comprised of the following:

16. Precious metalsPrecious metals comprise:

iv.34




Net profit for the year attributable to equity holders of the parent 27,810 18,392

Weighted average number of ordinary shares for basic and diluted earnings per share 428,947,990 360,965,715

Earnings per share – basic and diluted (KZT) 64.83 50.95

20

06

20

05

chart 19


Cash on hand 31,100 17,425

Balances with national (central) banks 177,905 19,804

Total cash and balances with national (central) banks 209,005 37,229

20

06

20

05

chart 20


Cash and balances with national (central) banks 209,005 37,229

Loans and advances to banks in OECD countries 41,923 190,888

Less minimum reserve deposit with CBR (1,712) (641)

Total cash and cash equivalents 249,216 227,476

20

06

20

05

chart 21


Refined precious metals 807 —

Total precious metals 807 —

20

06

20

05

chart 22


Debt securities 309,405 138,568

Equity investments 6,126 1,726

Derivative financial instruments 7,087 81

Total financial assets at fair value through profit or loss 322,618 140,375

20

06

20

05

chart 23

KZT million

Deferred income tax liabilities

1 January 8,290 6,976

Decrease in property and equipment revaluation reserve 407 72

Deferred income tax expense 8,774 1,242

31 December 17,471 8,290

20

06

20

05

chart 18

Effective 31 December Effective 31 Decemberinterest rate 2006 interest rate 2005

Debt securities:

Bonds of Depfa Investment Bank LTD 5.19 50,873 — —

Bonds of Freddie Mac 1.10227-6.8 45,314 4.60 12,965

Eurobonds of Dexia Banque Luxemburg — 44,313 — —

Eurobonds of Fannie MAE International Housing — 37,861 — —

Short-term notes of NBRK 5.035 34,895 2.22 1,002

Eurobonds of Fortis Banque Luxemburg — 18,992 — —

Bonds of Alliance Bank 8.5 9,154 — —

Eurobonds of Hеllenic Republic, Greece 3.6 8,233 — —

Eurobonds of KFW Intl Finance 4.7 6,478 5.25 6,722

Eurobonds of Caisse D’Amortissement Delta France 5.00 6,384 4.60 6,732

Eurobonds of JP Morgan Chase Bank London 8.73-17.50 5,359 — —

Corporate bonds of issuers of the Russian Federation 7.95-13.30 5,321 7.5-15.5 5,371

Bonds of Batys Transit 8.00 5,277 — —

Bonds of KAZEXPORTASTYK Holding 9.9-10.2 4,621 — —

Bonds of ATF Bank 8.125-10.9 4,272 8.50-10 4,466

Bonds of Food Contract Corporation 8.00 3,647 — —

Bonds of Small Business Development Fund 9.00 2,134 — —

Bonds of Halyk Bank 6.8-8.125 1,843 7.5-7.75 556

Bonds of CenterCredit Bank 8-10.00 1,536 8.5-10.4 680

Bonds of local executive bodies of the Russian Federation 7.20-10.90 1,496 8.20-13.30 1,080

Bonds of federal loan of the Ministry of Finance of the Russian Federation 6.30-10.00 1,392 10 210

Bonds of JP Morgan Chase Bank London 11.25 1,092 — —

Eurobonds of the Ministry of Finance of the Republic of Kazakhstan 11.125 1,052 11.13 2,159

State treasury bonds of the Ministry of Finance of the Republic of Kazakhstan 3.78-6.68 998 2.75-5.5 6,783

Eurobonds of TuranAlemFinance B.V. 7.875-8 905 7.875-8 334

Eurobonds of CALYON — 696 — —

Bonds of KazStroyService 9.00 662 — —

Eurobonds of ALB Finance B.V. 9 645 9 280

Eurobonds of Сenterdit International B.V. 8.00 590 — —

Bonds of Karazhanbasmunai 10.9 561 9.1-9.9 668

Bonds of BTA Ipoteka 8.5 527 — —

Bonds of Nurbank 9.00 521 — —

Bonds of Development Bank of Kazakhstan 6.5-7.125 476 9.1-13 964

Bonds of Kazakhaltyn 10.5 456 9.90 579

Bonds of Atyrau local executive bodies 8.5 240 8.5-8.6 292

Eurobonds of Temir Capital B.V. 9.00 192 — —

Bonds of Kazakhstan kagazy 11.30 133 10.40 132

Bonds of Glotur 10 104 10 102

Bonds of Kazatomprom 8.50 86 8.50 88

Bonds of Bank TuranAlem 10.5 52 8-9.90 272

Bonds of KazTransCom 8 12 8 135

Bonds of Kazakhstani Mortgage Company 8.89-9.50 10 6.9-12.25 191

US exchequer bonds — — 2.7306-10.7225 21,403

Eurobonds of European Investment Bank — — 3-5.625 13,577

Bonds of Federal Home Loan Bank — — 4.06 13,529

Eurobonds of InraAmerican Development Bank — — 5.375-6.125 8,916

Eurobonds of International Bank of Reconstruction and Development — — 5 8,153

%% kzt

millio

n

kzt

millio

n

chart 24

18. Loans and advances to banks

Movements in allowances for impairment losses on loans andadvances to banks for the years ended 31 December 2006 and 2005 aredisclosed in Note 7.

Loans and advances to banks included accrued interest of KZT 860 mil-lion and KZT 148 million as of 31 December 2006 and 2005, respectively.

As at 31 December 2006 and 2005 the Group had loans and advances tothe following banks, which individually exceeded 10% of the Bank’sequity, calculated according to the principles employed by the BasleCommittee (Note 37).

The fair value of pledged assets and carrying value of loans under reverserepurchase agreements as at 31 December 2006 and 2005 comprised:

As at 31 December 2006 the guarantee deposit included in loans andadvances to banks was placed with JP Morgan Chase Bank London assecurity for a reserve letter of credit in the amount of KZT 2,540 million.

iv.37iv.36





As at 31 December 2006 and 2005 included in financial assets at fairvalue through profit or loss is accrued interest income on debt securitiesamounting to KZT 1,816 million and KZT 1,649 million, respectively.

As at 31 December 2006 and 2005 financial assets at fair value throughprofit or loss included short-term notes of the National Bank of theRepublic of Kazakhstan, bonds of the federal loan of the Ministry ofFinance of the Russian Federation, and bonds of Kazakh and Russiancompanies pledged under repurchase agreements with other banks/cus-tomers with fair value amounting to KZT 262,008 million and KZT60,380 million, respectively. As at 31 December 2006 and 2005 all theagreements mature in January 2007 and January 2006, respectively(Notes 26, 27).


Eurobonds of Nordic Investment Bank — — 2.75 6,781

Bonds of the Government of Finland — — 5.88 4,794

Eurobonds of Bank Nederlandse Gemeenten — — 2.50 5,432

Bonds of KazTransOil — — 8.50 2,379

Eurobonds of Federal Farm Credit Bank — — 3.38 263

Bonds of Astana city administration — — 8.50 267

Bonds of Astana-Finance — — 9.40 126

Bonds of Khimfarm — — 10 120

Bonds of Mangistau REK — — 13 65

Total debt securities 309,405 138,568

continued

Ownership 31 December Ownership 31 Decembershare 2006 share 2005

Equity investments:

ADR Kazakhtelecom 5.11 2,342 5.11 1,673

EP Kazmunaigaz 0.164 2,077 — —

GDR EP Kazmunaigaz 3.247 1,148 — —

Ust-Kamenogorsk Titanium-Magnesium Plant 0.391 213 — —

Kazzinc 0.09 141 0.04 34

Halyk Bank 0.013 54 — —

Rosneft 0.12 36 — —

Lukoil 0.0003 34 — —

CenterCredit Bank 0.003 7 — —

Surgutneftegaz 0.0001 4 — —

TuranAlem Bank 0.0003 2 — —

ATF Bank 0.0003 1 — —

Kazakhtelecom ordinary 0.016 56 0.009 4preference 0.113 11 0.075 6

Aktobemunaigaz — — 0.004 9

Total equity securities 6,126 1,726

% kzt

millio

n

chart 25

%% kzt

millio

n

kzt

millio

n

% kzt

millio

n


Nominal value Net fair value Nominal valuel Net fair value

Derivative financial Liabilities Liabilitiesinstruments 31 December 31 December

Assets (KZT million) Assets (KZT million)

Foreign exchange contracts

Foreign exchange swap 29,704 4,075 (876) 16,865 2 (95)

Interest swap 128,055 2,284 (2,544) 14,108 77 (94)

Forward contracts 72,480 728 (130) 2,634 2 —

Securities purchase/sale contracts

Forward contracts 610 — (4) — —

7,087 (3,554) 81 (189)

chart 26


Loans and advances to banks 122,266 236,671

Correspondent accounts with other banks 30,277 18,478

Loans under reverse repurchase agreements 45,505 383

Less allowance for impairment losses (857) (1,245)

Total loans and advances to banks 197,191 254,287

20

06

20

05

chart 27


Bank Austria AG Wien — 26,812

Zurcher Kantonalbank — 26,812

Dexia Bank SA — 26,802

Fortis Bank NV/SA Brussels — 26,802

Depfa Investment Bank LTD, Ireland — 26,802

Societe Generale Paris France — 26,802

Moscow Business World Bank — 19,809

— 180,641

20

06

20

05

chart 28


Fair value Carrying value Fair value Carrying value of collateral of loans of collateral of loans

Notes of the National Bank of the Republic of Kazakhstan 26,318 25,010 — —

Bonds of Kazakhstan companies 6,127 5,042 — —

Bonds of the Ministry of Finance of the Republic of Kazakhstan 4,763 4,339 27 35

Shares of Kazakhstan companies 4,940 3,254 — —

Bonds of TuranAlem Bank 3,965 3,184 — —

Bonds of CenterCredit Bank 1,566 1,251 — —

Bonds of ATF Bank 838 821 52 45

Bonds of Nurbank 1,004 811 — —

Bonds of Caspian Bank 535 438 — —

Shares of ATF Bank 430 360 — —

Shares of TuranAlem Bank 329 351 — —

Bonds of Тexakabank 395 300 — —

Bonds of Alliance Bank 364 295 — —

Shares of Kazkommertsbank 58 49 300 303

Total securities purchased under reverse repurchase agreements 51,632 45,505 379 383

chart 29

20

06

20

05

Loans to individuals comprise the following products:

As at 31 December 2006 and 2005 the Group granted loans to the fol-lowing borrowers, respectively, which individually exceeded 10% of theBank’s equity, calculated according to the principles employed by theBasle Committee (Note 37).

As at 31 December 2006 and 2005 a significant part of loans (70.34%and 76.58% of the total portfolio) is granted to companies operating onthe territory of the Republic of Kazakhstan, which represents signifi-cant geographical concentration.

The fair value of pledged assets and carrying value of loans underreverse repurchase agreements as at 31 December 2006 and 2005 com-prised:

iv.39



19. Loans to customers

As at 31 December 2006 and 2005 accrued interest income included inloans to customers amounted to KZT 33,106 million and KZT 14,948 mil-lion, respectively.

Movements in allowances for impairment losses for the years ended31 December 2006 and 2005 are disclosed in Note 7.

As at 31 December 2006 unsecured loans included loans of KZT160,300 million, collateral of which was under the process of registra-tion (real estate, land, shares, guarantees, and other).

iv.38




Analysis by type of collateral:

Loans collateralized by real estate 429,701 193,975

Loans collateralized by guarantees of enterprises 219,410 97,787

Loans collateralized by shares of the banks and other companies 199,680 42,038

Loans collateralized by mixed types of collateral 168,269 96,385

Loans collateralized by equipment 127,966 71,370

Loans collateralized by accounts receivable 106,318 121,838

Loans collateralized by inventories 69,070 28,136

Loans collateralized by cash or Kazakh Government guarantees 51,414 14,195

Loans collateralized by guarantees of financial institutions 46,104 3,075

Loans collateralized by securities 6,183 3,884

Unsecured loans 254,725 70,728

Total loans to customers 1,678,840 743,411

20

06

20

05

chart 31


Mortgage loans 148,346 63,039

Consumer loans 74,987 24,375

Car loans 15,672 8,585

Other 22,703 1,425

Total loans to individuals 261,708 97,424

20

06

20

05

chart 33


Originated loans 1,713,183 768,808

Net investments in finance lease 4,573 3,198

Loans under reverse repurchase agreements 35,020 13,567

1,752,776 785,573

Less allowance for impairment losses (73,936) (42,162)


20

06

20

05

chart 30


Analysis by sector:

Trade 296,022 142,294

Individuals 261,708 97,424

Housing construction 225,622 84,830

Commercial real estate construction 163,481 79,743

Real estate 138,179 15,129

Investments and finance 87,724 42,720

Industrial and other construction 64,131 26,304

Food industry 52,802 29,115

Energy 44,877 30,156

Hotel business 41,079 16,271

Agriculture 38,931 23,738

Transport and communication 38,675 39,222

Production of construction materials 33,760 10,639

Machinery construction 21,778 12,988

Mining and metallurgy 20,309 23,968

Medicine 2,467 3,559

Culture and art 568 702

Other 146,727 64,609


20

06

20

05

chart 32


Alibi Holding 36,715 -

Jeilan Limited Holding 36,423 15,625

KUAT Holding 35,229 20,615

Mayberry Financial Services S.A. 34,942 20,645

Ordabasy Corporation 34,492 -

LLP SAT&Co Holding - 16,259

IKAN Holding - 14,780

177,801 87,924

20

06

20

05

chart 34

Year ended 31 December


Shares of Kazakh companies 30,640 21,574 3,473 1,281

Shares of Russian companies 6,686 5,803 8,880 8,342

Bonds of Kazakh companies 3,000 3,112 1,441 1,509

Bonds of Russian companies 1,318 1,157 830 808

Bonds of ATF Bank 1,017 1,033 1,030 1,065

Bonds of Halyk Bank 345 881 299 330

Shares of Savings Bank of the Russian Federation 958 875 — —

Shares of Halyk Bank 337 357 — —

Shares of Kazkommertsbank 183 227 — —

Shares of CenterCredit Bank 1 1 — —

Bonds of local executive bodies of the Russian Federation — — 200 172

Shares of Neftebank — — 60 60

Total securities purchased under reverse repurchase agreements 44,485 35,020 16,213 13,567

chart 35

20

06

20

05

21. Investments held to maturity

As at 31 December 2006 and 2005 interest income on debt securitiesamounting to KZT 6 million and KZT 6 million, respectively, was accruedand included in investments held to maturity.

22. Investments in associatesThe following enterprises were recorded in the consolidated financial

statements using the equity method:

In 2006 the Bank purchased 50% of shares of JSC OCOPAIM ZhetysuAsset Management Company (see Note 5).

The percentage held of the above associates represents both direct andindirect ownership of the Bank.

The movements of investments are accounted for in the consolidatedfinancial statements using the equity method:

iv.41



The components of net investment in finance lease as at 31 December 2006and 2005 are as follows:

The value of future minimum lease payments received from the customerunder finance lease as of 31 December 2006 and 2005 comprised:

20. Investments available-for-sale

As at 31 December 2006 and 2005 interest income on debt securitiesamounting to KZT 39 million and KZT 7 million, respectively, wasaccrued and included in investments available-for-sale.

iv.40




Minimum lease payments 5,606 3,843

Less unearned finance income (1,033) (645)

Net investment in finance lease 4,573 3,198

Current portion 2,004 1,675

Long-term portion 2,569 1,523

Net investment in finance lease 4,573 3,198

20

06

20

05

chart 36

Year ended 31 December

Not later than one year 2,368 1,975

From one year to five years 3,176 1,848

More than five years 62 20

Total value of future minimum lease payments 5,606 3,843

20

06

20

05

chart 37


Debt securities:

Bonds of the Ministry of Finance of the Republic of Kazakhstan 3.75-6.68 442 2.75-6.99 340

Short-term notes of NBRK 0.002 355 — —

Bonds of Small Business Development Fund 9 334 — —

Bonds of KAZEXPORTASTYK Holding 9.9-10.2 304 — —

Bonds of Kazakhstan Mortgage Company 6.90-8.89 271 6.9-8.29 87

Bonds of TuranAlem Bank 10.5 198 — —

Bonds of KazTransCom 8 124 — —

Bonds of Karazhanbasmunai 10.5 124 — —

Bonds of Astana-Finance 11.20 121 — —

Bonds of Kazakhaltyn 10.5 120 — —

Bonds of Khimfarm 10 120 — —

Bonds of ATF Bank 8.5-9 106 — —

Bonds of CenterCredit Bank 9 7

2,626 427

chart 38

%% kzt

millio

n

kzt

millio

n


Bonds of Bank CenterCredit 8.5-9% 117 8.5% 94

Bonds of Halyk Bank 7.75% 109 7.75% 99

Bonds of ATF Bank 8.5% 92 8.5% 92

Bonds of the Ministry of Finance of the Kyrgyz Republic 6.95% 39 4.52-8.15% 40

Bonds of the Ministry of Finance of the Republic of Kazakhstan — — 4-4.3% 234

Bonds of the National Bank of the Kyrgyz Republic — — 4.9% 3

Total investments held to maturity 357 562

chart 40

%% kzt

millio

n

kzt

millio

n

Ownership 31 December Ownership 31 Decembershare 2006 share 2005

Equity securities:

Kazakhstan Stock Exchange 1.33% 2 — —

2 —

Total investments available-for-sale 2,628 427

chart 39

%% kzt

millio

n

kzt

millio

n


Held Amount Held Amount

Ular Umit Pension Fund 41.18% 725 41.18% 388

JSC OCOPAIM Zhetysu Asset Management Company 50.00% 993 — —

First Credit Bureau LLP 18.40% 37 18.40% 37

1,755 425

20

06

20

05

chart 41


1 January 425 218

Purchase cost 200 33

Share of results of associates 1,130 174

31 December 1,755 425

20

06

20

05

chart 42

ness and financial risk exposures, national and local economic trendsand conditions, was identified.

Goodwill impairment is usually determined by discounted future cashinflows. For the forecast cash inflows the period of 5 years is used basedon financial budgets using discounting rate of 14%. The managementuses the following main assumptions as the basis for forecast cashinflows:

Economic growth of the Republic of Kazakhstan.Stable legislation on obligatory pension contributions and therefore

growth of the pension system.Stable structure of the customer base (customers with relatively high

wages).Favorable demographic indexes (more of young population).Possible sales of several complimentary products.



23. GoodwillIn October 2005 Kazkommertsbank purchased 100% shares in JSC

OCOPAIM ABN Amro Asset Management (ABN AM) and 80.01% in JSCABN Amro CaspiyMunaiGaz Accumulation Pension Fund (ABN APF)from JSC ABN AMRO Bank Kazakhstan. In the agreement with the seller,ABN APF and ABN AM received new names—JSC OCOPAIM GrantumAsset Management (Grantum PAMC) and JSC Grantum APF (GrantumAPF) (see Note 1).

The net assets and the goodwill acquired are as follows:

The Goodwill arising on the acquisition is attributable to the anticipat-ed profitability of the distribution of the Group’s products in the newmarkets, long-term funds attraction and the anticipated future syner-gies from the combination.

Goodwill acquired in a business combination is allocated at acquisi-tion to the cash generating units (CGUs) that are expected to benefitfrom that business combination. These cash generating units do notcarry on their balance sheets any intangible assets with indefinite usefullives, other than goodwill.

Grantum APF contributed KZT 165 million of revenue and KZT 35 mil-lion to the Group’s profit before tax for the period between the date ofacquisition and 31 December 2005.

Grantum PAMC contributed KZT 72 million of revenue and KZT 50 mil-lion to the Group’s profit before tax for the period between the date ofacquisition and 31 December 2005.

If the acquisition of Grantum APF and Grantum PAMC AssetManagement had been completed on 1 January 2005, total group rev-enue for the year of 2005 would have been KZT 86,051 million, and prof-it for the year of 2005 would have been KZT 20,823 million.

As at 31 December 2006 no objective evidence of goodwill impair-ment, such as deterioration of the companies’ liquidity, solvency, busi-

iv.42



KZT million

Property, equipment and intangible assets 1 18 19

Investments held to maturities 259 184 443

Investments available-for-sale 151 244 395

Comission receivable 22 47 69

Securities purchased under reverse repurchase agreements 81 60 141

Other assets 2 4 6

Tax payables (16) (43) (59)

Other liabilities (3) (27) (30)

497 487 984

Goodwill 1,124 1,281 2,405

Total consideration, satisfied by cash 1,621 1,768 3,389

Net cash outflow on acquisition:

Cash consideration paid (1,635) (1,787) (3,422)

Cash acquired 14 19 33

Total (1,621) (1,768) (3,389)

Cash generating companies Year ended 31 December (KZT million)

Grantum APF 1,281 1,281

Grantum PAMC 1,124 1,124

2,405 2,405

20

06

20

05

chart 44

chart 43

To

ta

l

Gr

an

tu

m A

PF

Gra

ntu

m P

AM

C

Temirlik with the river-tributary borders with the Charyn canyon

iv.45



24. Property, equipment and intangible assets

As at 31 December 2006 and 2005 property, equipment and intangibleassets included completely depreciated and amortized assets with ini-tial cost in the amount of KZT 1,947 million and KZT 1,435 million,respectively.

The effective date of the revaluation of buildings and other real estatewas 16 June 2006. The buildings and real estate were revalued based onan independent expert’s appraisal LLP “Laboratory of independentappraisal ‘Optima’ ”, registration number UL-00525, legal address: office513, 58 Dzhandosov St., Almaty, the Republic of Kazakhstan. Methods ofvaluation used are cost approach, benchmark (comparative) approach,and profit method. Additionally the method of determining fair valuedirectly by reference to observable prices in an active market has beenapplied. The source for obtaining information by this method is publica-tions placing announcements on purchase-and-sale of real estateobjects, and the Internet sites on commercial realty, helping in selectinganalogues maximally approximated by their characteristics to evaluat-ed objects.

Intangible assets include software, patents and licenses.

iv.44



KZT million

Buildings Furniture Intangible Construction and other real estate and equipment assets in progress Other Total

At primary/revalued cost

31 December 2004 3,549 6,540 898 9 512 11,508

Additions 452 1,478 299 29 308 2,566

Revaluation increase 346 — — — — 346

Acquisition of subsidiaries — 31 5 — 4 40

Subsidiaries adjustments for 2004 — 13 — — — 13

Disposals (364) (235) (18) — (118) (735)

Exchange differences — — — — 6 6

31 December 2005 3,983 7,827 1,184 38 712 13,744

Additions 1,564 3,220 345 2,081 505 7,715

Revaluation increase 1,315 — — — — 1,315

Disposals (44) (271) (1) — (144) (460)

Exchange differences — (15) 1 — 28 14

31 December 2006 6,818 10,761 1,529 2,119 1,101 22,328

Accumulated depreciation

31 December 2004 355 3,115 512 — 140 4,122

Charge for the year 58 1,048 205 — 253 1,564

Acquisition of subsidiaries — 12 2 — 3 17

Subsidiaries adjustments for 2004 — 8 — — — 8

Written off upon disposal (354) (157) (13) — (107) (631)

Exchange differences — — — — 2 2

31 December 2005 59 4,026 706 — 291 5,082

Charge for the year 70 1,432 224 — 107 1,833

Written off upon revaluation — 1 — — — 1

Written off upon disposal (33) (145) (1) — (103) (282)

Exchange differences 1 4 1 — 7 13

31 December 2006 97 5,318 930 — 302 6,647

Net book value31 December 2006 6,721 5,443 599 2,119 799 15,68131 December 2005 3,924 3,801 478 38 421 8,662

chart 45

Fair value of assets pledged and carrying value of loans under reverserepurchase agreements as at 31 December 2006 and 2005 are presentedas follows:

27. Customer accountsCustomer accounts comprise:

As at 31 December 2006 and 2005 customer accounts included accruedinterest expense in the amounts of KZT 7,466 million and KZT 4,596 mil-lion, respectively.

As at 31 December 2006 and 2005 customer accounts were deducted asa guarantee for issued letters of credit and other transactions relating tocontingent liabilities in the amounts of KZT 2,542 million and KZT15,744 million, respectively.

As at 31 December 2006 and 2005 the customer accounts in theamounts of KZT 250,184 million (36.37%) and KZT 47,847 million(15.77%), respectively, were due to 10 customers, which represent signif-icant concentration.

iv.47



25. Other assets

Movements in allowances for impairment losses for the years ended31 December 2006 and 2005 are disclosed in Note 7.

iv.46




Prepayments and other debtors 4,968 2,927

Prepaid expenses 3,232 978

Income tax receivable 2,611 1,685

Insurance agreement accounts receivable 1,220 1,040

Tax settlements, other than income tax 1,101 587

13,132 7,217

Less allowance for impairment losses (117) (131)

Total other assets 13,015 7,086

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chart 46

26. Loans and advances from banks

As of 31 December 2006 and 2005 loans and advances from banksincluded accrued interest expenses in the amounts of KZT 3,391 millionand KZT 1,156 million, respectively.

As at 31 December 2006 and 2005 the loans and advances from banksin the amounts of KZT 294,711 million (33.33%) and KZT 226,528 million(59.74%), respectively, were due to 4 and 3 banks, which represent signif-icant concentration.

As at 31 December 2006 loans with other banks and financial institu-tions for KZT 262,938 million (95.00% of total loans with other banks andfinancial establishments) consisted of 34 banks and financial institu-tions of such countries as Russia, Great Britain, the Netherlands, theCzech Republic, Canada, the USA, Switzerland, Kuwait, Austria,Luxemburg, Korea, Kazakhstan, Germany, Belgium, and Singapore.Maturities of these loans are from 1 month up to 67 months.

As at 31 December 2006 and 2005 included in loans and advances frombanks are loans under repurchase agreements amounting to KZT250,852 million and KZT 59,111 million, respectively, with maturity inJanuary 2007 and January 2006, respectively.


Correspondent accounts of other banks 46,273 29,121

Loans from banks and financial institutions, including:

Syndicated loan from a group of banks (Bank of Tokyo Mitsubishi)(maturity—December 2006, interest rate—4.819%) — 109,201

Syndicated loan from a group of banks (Bank of Tokyo Mitsubishi)(maturity—December 2008, interest rate—6.22%) 61,044 63,950

Syndicated loan from a group of banks (Citibank International Plc)(maturity—Aufust 2006, interest rate —4.87%) — 53,377

Syndicated loan from a group of banks (ING Bank N.V.)(maturity—February 2008, interest rate—5.67%) 107,377 —

Syndicated loan from a group of banks (Bank of Tokyo Mitsubushi/ ING UniCredit/Standard Chartered Bank) (maturity—December 2009, interest rate—5,95%) 37,809 —

Syndicated loan from a group of banks (Bank of Tokyo Mitsubushi/ ING UniCredit/Standard Chartered Bank) (maturity—December 2007, interest rate—5.625%) 88,481 —

Loan from EBRD (maturity on 21 December 2009, interest rate—4.376–6.403% annually) 2,371 10,611

Loan from EBRD (maturity on 14 September 2007, interest rate—5.69–6.25% annully) 4,933 —

Due to NBRK — 3,617

Loans with other banks and financial establishments 276,779 41,770

Deposits with banks 8,382 8,448

Loans under repurchase agreements 250,852 59,111

Total loans and advances from banks 884,301 379,206

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chart 47


Fair value Carrying value Fair value Carrying valueof collateral of loans of collateral of loans

Eurobonds from Depfa Bank PLC 50,800 49,878 — —

Eurobonds from Dexia Banque Intl A Luxembourg 44,313 43,439 — —

Eurobonds of Freddie MAC 44,171 42,915 — —

Eurobonds of Fannie MAE 37,861 37,116

Notes of the National Bank of the Republic of Kazakhstan 24,944 24,942 — —

Eurobonds of Fortis Banque Generale A Luxembourg 18,992 18,617 — —

Bonds of companies of the Republic of Kazakhstan 13,151 10,952 — —

Eurobonds of Hellenic Republic 7,946 8,408 — —

Eurobonds of KFW Intl Finance 6,350 6,324 6,720 6,726

Eurobonds of Caisse D'Amortissement Dela France 6,350 6,260 6,700 6,732

Bonds of ATF Bank 1,485 1,200 — —

Bonds of CenterCredit Bank 1,000 801 — —

Bonds of Federal Home Loan Bank — — 13,341 13,533

Eurononds of the International Bank for Development and Reconstruction — — 8,050 8,158

Eurobonds of European Investment Bank — — 6,635 6,719

Eurobonds of Bank Nederlandse Gemeenten — — 5,331 5,434

Eurobonds of the Government of Finland — — 4,699 4,795

Bonds of the Ministry of Finance ofthe Republic of Kazakhstan — — 4,474 4,041

Eurobonds of the Ministry of Finance ofthe Republic of Kazakhstan — — 1,324 1,701

Shares of Kazakhstan companies — — 2,809 1,040

Bonds of the Russian Federation companies — — 94 85

Bonds of local executive bodies of the Russian Federation — — 154 147

Total securities under repurchase agreements 257,363 250,852 60,331 59,111

chart 48

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Loans and time deposits 425,822 189,201

Demand deposits 257,600 114,204

Loans under repurchase agreements 4,384 32

Total customer accounts 687,806 303,437

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chart 49

As at 31 December 2006 and 2005 accrued inte rest expen se is inc lu dedin debt secu rit ies issu ed amoun ting to KZT 6,944 mil lion and KZT 4,794mil lion, respec ti ve ly.

Eurobonds were issu ed by Kazkommerts International B.V., a sub si di -ary of the Bank, and were gua ran te ed by the Bank. For eurobonds with amatu ri ty of May 2007, cou pon is paid semiannually on 8 May and8 November, while for those having a matu ri ty of April 2013, inte rest ispaid on 16 April and 16 October, for eurobonds with matu ri ty of April2014, inte rest is paid on 7 April and 7 October, for eurobonds with matu -ri ty of November 2009, inte rest is paid 3 May and 3 November, foreurobonds having a matu ri ty of November 2015 inte rest is paid on3 May and 3 November, for eurobonds with matu ri ty of March 2011 inte -rest is paid on 23 March, for eurobonds with matu ri ty of November 2016inte rest is paid on 29 May and 29 November.

29. Other borrowed funds

As at 31 December 2006 and 2005 accrued interest expense included inother borrowed funds in the amount of 255 million tenge and 245 mil-lion tenge, respectively.

On 8 December 2005 Kazkommertsbank launched the inaugural futureflow securitization of diversified payment rights for 300 million USD. The

As at 31 December 2006 and 2005 customer accounts included loansunder repurchase agreements amounting to KZT 4,384 million and KZT32 million, respectively, with the maturity of six months.

Fair value of assets pledged and carrying value of of loans under repurchaseagreements as at 31 December 2006 and 2005 are presented as follows:

28. Debt securities issued

iv.49iv.48





Analysis by sector:

IIndividuals 196,072 110,041

Chemical and petrochemical industry 167,466 21,770

Construction 75,750 29,492

Trade 52,364 26,409

Investments and Finance 52,076 75,587

Individual services 36,608 25

Transport and communication 30,209 6,865

Agriculture 20,232 4,224

Real estate 11,266 213

Mining and metallurgy 7,724 1,864

Hotel business 4,972 220

Light industry 3,592 50

Distribution of electricity, gas and water 3,352 658

Education 2,170 1,134

Food industry 1,568 1,475

Culture and art 1,031 154

Health care 965 206

Machinery construction 689 380

Public organizations and unions 680 717

Energy 1 14,377

Other 19,019 7,576

Total customer accounts 687,806 303,437

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chart 50



Bonds of Russian companies 2,477 2,304 — —

Shares of Russian companies 1,551 1,515 49 32

Bonds of local executive bodies of the Russian Federation 617 565 — —

Total securities sold under repurchase agreements 4,645 4,384 49 32

chart 51

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KZT million

Annual 31 December 31 DecemberMaturity date coupon rate 2006 2005

Eurobonds of Kazkommerts International B.V. due

In May 2007:Tranche А, issued in May 2002 and placed at the price of 99.043% 8 May 2007 10.125% 17,594 18,561

Tranche B, issued in November 2002and placed at the price of 107.00% 8 May 2007 10.125% 6,350 6,699

In April 2013:Tranche А, issued in April 2003 at the price of 97.548% 16 April 2013 8.5% 43,729 45,730

Tranche B issued in April 2003 and placed in May 2003 at the price of 99.00% 16 April 2013 8.5% 19,050 20,097

In April 2014:Issued in April 2004 at the price of 99.15% 7 April 2014 7.875% 50,165 52,386

In November 2009:Tranche A issued in November 2004 3 Novemberat the price of 98.967% 2009 7% 42,786 46,880

Tranche B issued in February 2005 3 November at the price of 98.967% 2009 7% 19,050 20,097

In November 2015:Issued in November 2005 3 Novemberat the price of 98.32% 2015 8% 63,246 66,990

Issued in February 2006 24 Februaryat the price of 100% 2009 4.25% 8,288 —

Issued in March 2006 at the price of 99.993% 24 March 2011 5.125% 48,465 —

chart 52

KZT million

Annual 31 December 31 DecemberMaturity date coupon rate 2006 2005

Issued in November, 2006 29 Novemberat the price of 98.282% 2016 7.5% 63,500 —

382,223 277,440

Including /(less):Discount on debt securities issued (5,023) (4,098)

Amounts of accrued interest on debt securities issued 6,385 4,125

Total issued Eurobonds of Kazkommerts International B.V. 383,585 277,467

Issued bonds of Kazkommertsbank 3,036 3,957

Amounts of accrued expenses on issued bonds of Kazkommertsbank 97 127

Issued promissory notes of MKB 36,982 21,040

Accrued interest expense on issued promissory notes of MKB 462 542

Total debt securities issued 424,162 303,133

continued

31 December 31 DecemberMaturity Interest rate, 2006 Interest rate, 2005

Currency date % (KZT million) % (KZT million)

15 June Kazkommerts DPR Company USD 2013 6.59 – 7.95% 56,792 6.84 – 6.91% 39,806

15 January DEG-Deutsche Investitions MBH USD 2014 7.88 – 8.86% 6,559 7.05 – 7.32% 6,884

25 March Private Export Funding Corporation USD 2011 5.65 – 5.97% 1,160 4.54 – 4.64% 1,148

15 June DEERE Credit USD 2011 5.75 – 5.8% 480 4.74 – 4.91% 872

Funding of agricultural 31 March equipment purchasing USD 2011 5.64 – 9.53% 1,016 8.04 – 8.83% 747

27 DecemberIntesa Soditic Trade Finance Ltd USD 2007 6.86% 2,545 6% 646

Funding by Ministry of Finance of Republic of Kazakhstan 30 Septemberand regional centers KZT 2011 0.5 – 5.81% 156 0.5 – 5% 210

Funding by Ministry 20 December of Finance of Republic of Kazakhstan EURO 2009 5% 104 5% 211

Funding by Ministry 01 Julyof Finance of Kyrgyz Republic USD 2015 1.5% 2 1.5% 3

Hungarian International Finance Ltd — — — — 8.04% 56

Funding by the Small Business Development Support Fund — — — — 7.3% 21

Total other borrowed funds 68,814 50,604

chart 53


As at 31 December 2005 the Bank’s share capi tal com pris ed the fol -lowing:

The pre fe ren ce sha res have a nomi nal value of KZT 10 and carry no vot-ing rights, unless divi dends are not paid, but rank ahead of the ordi na rysha res in the event of liqui da tion of the Bank. Annual divi dend is deter -mi ned by the pre fe ren ce sha res issu an ce rules in the amount of USD0.04 per share. These sha res are not rede e mab le.

Dividend dec la red on pre fe ren ce sha res amoun ted to KZT 635 mil lionand KZT 669 mil lion in 2006 and 2005, respec ti ve ly. In 2006 and 2005divi dends on ordi na ry sha res have not been dec la red.

In 2006, sha rehol ders of the Group inc re as ed its nomi nal value of itsshare capi tal by KZT 2,000 mil lion, inc lu ding:

on 21 July 2006, Kazkommertsbank com ple ted pla ce ment of96,500,000 ordi na ry sha res of JSC Kazkommertsbank at the price of KZT200 per share on the local mar ket;

in November 2006, the sha rehol ders of the Bank (JSC Central-AsianInvestment Company, Mr. Subhanberdin and EBRD) con duc ted pla ce -ment of 45,714,706 glo bal depo si ta ry receipts (GDR), each repres en tingtwo sha res at the price of USD 18.50 per one GDR;

in December 2006, Kazkommertsbank star ted pla ce ment of issu edsha res for exi sting sha rehol ders of the Bank in the amount of103,500,000 ordi na ry sha res at the price of USD 9.25 per share in tengeequi va lent through ini ti al public offe ring on the local mar ket.

33. Financial com mit ments and con tin gen ci esIn the nor mal cour se of busi ness, the Group is a party to finan cial

instru ments with off-balan ce sheet risk in order to meet the needs of itscus to mers. These instru ments invol ving vary ing degre es of cre dit riskare not reflec ted in the balan ce sheet.

The Group uses the same poli cy of cre dit con trol and mana ge mentupon accep ting off-balan ce com mit ments that it uses rela ting to balan -ce com mit ments.

As at 31 December 2006 and 2005 accrued pro vi sion on let ters of cre -dit and gua ran te es amoun ted to KZT 4,055 mil lion and KZT 2,589 mil -lion, respec ti ve ly.

The risk weighted amount is obta i ned by apply ing cre dit con ver sionfac tor and coun ter par ty risk weightings accor ding to the prin ci plesemplo y ed by the Basle Committee on Banking Supervision.

As at 31 December 2006 and 2005, the nomi nal or con tract amountsand risk weighted amounts were:

iv.51



transaction is a true-sale securitization of the Bank’s dollar-denominatedpresent and future diversified payment rights (SWIFT USD MT100 series) toKazkommerts DPR Company (special purpose vehicle created on theCayman Islands). Kazkommerts DPR Company is operated by MaplesFinance Limited, which is incorporated in the Cayman Islands. Allocationwas made in three series 2005A in the amount of USD 200 million, 2005Band 2005C in the amount of USD 50 million each. Two latter tranches wereallocated by private offering, and Series 2005A was insured by the special-ized financial company Ambak, the rate of which amounted to 3-monthLIBOR plus 0.29%.

On June 7 2006 Kazkommertsbank in the framework of the future pay-ments flows securitization Program allocated additional series of bonds2006А and 2006В, insured by the specialized financial companiesAmbak and FGIC. The sum of the given bonds amounted to USD 100 mil-lion each, with maturity of 7 years with 3-year grace period of the princi-pal debt and rate of 3-month LIBOR plus 0.25 %.

30. Other liabilities

31. Subordinated debtAs at 31 December 2006 and 2005 accrued interest expenses included

in subordinated debt amounted to KZT 1,677 million and KZT 707 mil-lion, respectively.

In the event of bankruptcy or liquidation of the Bank repayment ofthis debt is subordinate to the repayments of the Bank’s liabilities to allother creditors.

32. Share capital and share premiumAs at 31 December 2006 the Bank’s share capital comprised the following:

iv.50




Taxes payable, other than income tax 2,992 1,760

Payable to employees 1,576 1,033

Accounts payable on re-insurers 616 611

Advances received 144 412

Other 3,259 775

8,587 4,591

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chart 54

31 December 31 DecemberMaturity Interest 2006 2005

Currency date (year) rate, % (KZT million) (KZT million)

Subordinated debt of Kazkommerts Finance II B.V. USD 2016 9.6417% 26,239 —

Subordinated debt of Citigroup GMD AG & CO USD 2014 8.194% 12,943 13,654

Perpetual debt of Kazkommerts Finance II B.V. USD — 9.2531% 12,715 13,485

Subordinated bonds KZT 2015 7.5% 12,639 12,582

Debt component of preference shares KZT — — 5,758 6,074

Indexed subordinated bonds KZT 2007 7.0% 3,479 3,699

Subordinated bonds MKB USD 2016 10% 2,570 —

International subordinated debt USD 2007 11% 2,537 2,668

Subordinated bonds USD 2007 5.5% 42 51

78,922 52,213

chart 55

KZT million

Authorized Unpaid share Repurchased Totalshare capital capital share capital share capital

Ordinary shares 5,748 (1) — 5,747

Preference shares 1,248 — — 1,248

6,996 (1) — 6,995

chart 56

KZT million

Authorized Unpaid share Repurchased Totalshare capital capital share capital share capital

Ordinary shares 3,750 — — 3,750

Preference shares 1,250 — (4) 1,246

5,000 — (4) 4,996

chart 57


Nominal Risk weighted Nominal Risk weightedamount amount amount amount

Contingent liabilities and credit commitments

Guarantees issued and similar commitments 91,683 91,683 39,928 39,928

Letters of credit and other transaction related to contingent obligations 92,413 17,982 59,951 11,680

Commitments on loans and unused credit lines 10,921 10,921 2,670 2,670

Total contingent liabilities and credit commitments 195,017 120,586 102,549 54,278

chart 58

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34. Transactions with related partiesRelated par ti es or tran sac tions with rela ted par ti es, as defi ned by IAS

24 “Related party dis clos ures”, repres ent:Parties that direc tly or indi rec tly through one or more inter me di a ri es:

con trol, or are con trol led by, or are under com mon con trol with theGroup (this inc lu des parents, sub si di a ri es and fel low sub si di a ri es); havean inte rest in the Group that gives then sig ni fi cant influ en ce over theBank; and that have joint con trol over the Group;

Associates—enter pris es on which the Group has sig ni fi cant influ en ceand which is neither a sub si di ary nor a joint ven tu re of the inves tor;

Joint ven tu res in which the Group is a ven tu rer;Members of key mana ge ment per son nel of the Group or its parent; Close mem bers of the fami ly of any indi vi du als refer red to in (a) or (d);Parties that are entit ies con trol led, join tly con trol led or sig ni fi can tly

influ en ced by, or for which sig ni fi cant voting power in such enti ty res -ides with, direc tly or indi rec tly, any indi vi du al refer red to in (d) or (e); or

Post-emplo y ment ben efit plans for the ben efit of emplo y e es of theGroup, or of any enti ty that is a rela ted party of the Group.

The Group had the fol lowing tran sac tions out stan ding with rela ted par ti es:

Included in the income statement for the years ended 31 December2006 and 2005 are the following amounts which arose due to transac-tions with related parties:

Key mana ge ment per son nel com pen sa tion for the years ended 31December 2006 and 2005 is repres en ted by short-term emplo y ee ben efits.

iv.53



Capital com mit ments As at 31 December 2006 and 2005 the capi tal com mit ments sum

amoun ted to KZT 5,866 mil lion and KZT 110 mil lion, respec ti ve ly.

Operating lease com mit ments No mate ri al ren tal com mit ments were out stan ding as at 31 December

2006 and 2005.

Fiduciary acti vi ti es In the nor mal cour se of its busi ness the Group enters into agre e ments

with limi ted right on deci sion making with cli ents for their assets mana -ge ment in accor dan ce with spe ci fic cri te ria esta blished by cli ents. TheGroup may be liab le for los ses or actions aimed at appro pri a tion of thecli ents’ funds until such funds or secu rit ies are not retur ned to the cli -ent. The maxi mum poten ti al finan cial risk of the Group at any givenmoment is equal to the volu me of the cli ents’ funds plus/minus anyunre a liz ed inco me/loss on the cli ent’s posi tion.

The Group also pro vi des depo si ta ry ser vi ces to its cus to mers. As at 31December 2006 and 2005 the Group had cus to mer secu rit ies in its nomi -nal hol der accounts tota ling:

on bro ker-dea ler ope ra tions 41,579,877 items and 13,175,579 items,respec ti ve ly;

on cus to di al ope ra tions 726,520,526 items and 333,537,909 items,respec ti ve ly.

Legal pro ce e dings From time to time and in the nor mal cour se of busi ness, cla ims aga inst

the Group are recei ved from cus to mers and coun ter par ti es.Management is of the opi nion that no mate ri al unaccrued los ses will beincur red and accor din gly no pro vi sion has been made in these con so li -da ted finan cial sta te ments.

Taxes Due to the pres en ce in com mer cial legi sla tion of the coun tri es where

the Group ope ra tes, and tax legi sla tion in par ti cu lar, of pro vi sionsallowing more than one inter pre ta tion, and also due to the prac ti cedeve lo ped in a gen eral ly unstab le envi ron ment by the tax autho rit ies ofmaking arbi tra ry judgment of busi ness acti vi ti es, if a par ti cu lar tre at -ment based on Management’s judgment of the Group’s busi ness acti vi -ti es was to be chal len ged by the tax autho rit ies, the Group may be asses -sed addit io nal taxes, pena lti es and inte rest. Such uncer ta in ty may rela -te to valu a tion of finan cial instru ments, loss and impa ir ment pro vi -sions and mar ket level for deals’ pri cing. The Group beli e ves that it hasalre a dy made all tax accruals, and the re fo re no allowan ce has beenmade in the finan cial sta te ments. Tax years remain open to revi ew bythe tax autho rit ies for five years.

Pensions and reti re ment plans Employees recei ve pen sion ben efits in accor dan ce with the requi re -

ments of the legi sla tion of the coun tri es in which the Bank and its sub si -di a ri es ope ra te. As at 31 December 2006 and 2005 the Group was notliab le for any sup ple men ta ry pen sions, post-reti re ment health care,insu ran ce ben efits, or reti re ment inde mnit ies to its cur rent or for meremplo y e es.

Operating envi ron ment The Group’s prin ci pal busi ness acti vi ti es are within the Republic of

Kazakhstan. Laws and regu la tions affec ting the busi ness envi ron mentin the Republic of Kazakhstan are sub ject to rapid chan ges and theGroup’s assets and ope ra tions could be at risk due to nega ti ve chan ges inthe poli ti cal and busi ness envi ron ment.

iv.52




Total category Total category as per financial as per financial

Related party statements Related party statementsbalances caption balances caption

Loans to customers 2,052 1,752,776 1,400 785,573entities with joint control or significant influence over the entity 114 342key management personnel of the entity or its parent 1,938 1022other related parties — 36

Allowance for impairment losses 50 73,936 43 42,162entities with joint control or significant influence over the entity 15 20key management personnel of the entity or its parent 35 21other related parties — 2

Investments in associates 1,718 1,755 388 425to associates 1,718 388

Customer accounts 8,326 687,806 2,272 303,437entities with joint control or significant influence over the entity 92 15associates 1,050 1,093key management personnel of the entity or its parent 7,062 1,157other related parties 122 7

Provision for guarantees and other off-balance sheet contingencies 356 4,055 — 2,589key management personnel of the entity or its parent 1 —other related parties 355 —

Commitments on loans and unused credit lines 651 10,921 869 2,670entities with joint control or significant influence over the entity 215 335key management personnel of the entity or its parent 431 531other related parties 5 3

Guarantees issued and similar commitements 7,142 91,683 19 39,928key management personnel of the entity or its parent 30 19other related parties 7,112 —

chart 59

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Total category Total category Related party as per financial Related party as per financialtransactions statements caption transactions statements caption

Interest income 130 147,250 251 86,407

Interest expense (258) (83,115) (250) (45,855)

Operating expense (500) (18,039) (662) (13,368)

Short-term employee benefits 500 9,154 662 6,517

chart 60

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Transactions betwe en the busi ness seg ments are con duc ted on nor malcom mer cial terms and con dit ions. Funds are ordi na ri ly real lo ca ted betwe enseg ments, res ul ting in fun ding cost tran sfers dis clos ed in ope ra ting inco -me. Interest char ged for these funds is based on the Group’s cost of fundsattrac ted. There are no other mate ri al items of inco me or expen se betwe -en the busi ness seg ments. Segment assets and lia bi lit ies com prise of ope -ra ting assets and lia bi lit ies, being the maj ori ty of the balan ces sheet, butexclu ding items such as taxa tion and bor rowings. Internal char ges andtran sfer pri cing adjust ments have been reflec ted in the per for man ce ofeach seg ment. Revenue sha ring agre e ments are used to allo ca te exter nalcus to mer reve nu es to a busi ness seg ment on a rea so nab le basis.

Segment information about these businesses is presented below.

iv.55



35. Segment repor ting

Business seg mentsThe Group is orga niz ed on the basis of three main busi ness seg ments:Retail ban king—repres en ting pri va te ban king ser vi ces, pri va te cus to -

mer cur rent accounts, savings, depo sits, invest ment savings pro ducts,cus to dy, cre dit and debit cards, con su mer loans and mort ga ges.

Corporate ban king—repres en ting cur rent accounts, depo sits, over -drafts, loan and other cre dit faci lit ies, foreign cur ren cy pro ducts, gua -ran te es and let ters of cre dit and deri va ti ve pro ducts.

Investment ban king—repres en ting finan cial instru ments tra ding,struc tu red finan cing, and mer ger and acqu i si tions advi ce.

iv.54



Year ended 31 December 2006

Retail banking Corporate banking Investment banking Other Unallocated Eliminations (KZT million)

External interest income 19,119 112,603 14,594 309 625 — 147,250

Internal interest income 10,879 14,777 61,125 13 40,026 (126,820) —

External interest expenses (8,038) (10,033) (64,442) 13 (615) — (83,115)

Internal interest expenses (10,236) (60,338) (16,203) (13) (39,393) 126,183 —

Net interest income before provision for impairment losses on interest bearing assets 11,724 57,009 (4,926) 322 643 (637) 64,135

Provisions for impairment losses on interest bearing assets (4,224) (28,282) (388) 7 — — (32,887)

Net non-interest income 5,353 10,437 11,270 2,037 (58) (72) 28,967

Operating income 12,853 39,164 5,956 2,366 585 (709) 60,215

Operating expenses (6,782) (9,893) (1,159) (852) (62) 709 (18,039)

Operating profit 6,071 29,271 4,797 1,514 523 — 42,176

Share of results of associates — — 1,130 — — — 1,130

Provision for guarantees and other off-balance sheet contingencies and for impairment losses on other transactions — (2,022) 422 (331) — — (1,931)

Profit before income tax 6,071 27,249 6,349 1,183 523 — 41,375

Income tax expense — — — — (11,789) — (11,789)

Net profit 6,071 27,249 6,349 1,183 (11,266) — 29,586

Total assets 261,708 1,417,132 765,391 8,244 767,055 (775,228) 2,444,302

Total liabilities 196,072 491,734 1,514,514 3,351 733,774 (759,069) 2,180,376

chart 61

Year ended 31 December 2006

Retail banking Corporate banking Investment banking Other Unallocated Eliminations (KZT million)

External interest income 11,825 65,926 8,449 194 13 — 86,407

Internal interest income 6,324 1,525 35,947 9 26,434 (70,239) —

External interest expenses (5,009) (5,357) (35,174) — (315) — (45,855)

Internal interest expenses (4,912) (31,035) (7,849) — (25,704) 69,500 —

Net interest income before provision for impairment losses on interest bearing assets 8,228 31,059 1,373 203 428 (739) 40,552

Provisions for impairment losses on interest bearing assets (2,104) (15,017) (707) (5) — — (17,833)

Net non-interest income 3,604 6,459 1,602 2,249 (9) 662 14,567

Operating income 9,728 22,501 2,268 2,447 419 (77) 37,286

Operating expenses (4,634) (7,534) (577) (678) (22) 77 (13,368)

Operating profit 5,094 14,967 1,691 1,769 397 — 23,918

Share of results of associates — — 174 — — — 174

Provision for guarantees and other off-balance sheet contingencies and for impairment losses on other transactions — (731) (396) (812) — — (1,939)

Profit before income tax 5,094 14,236 1,469 957 397 — 22,153

Income tax expense — — — — (2,338) — (2,338)

Net profit 5,094 14,236 1,469 957 (1,941) — 19,815

Total assets 97,424 645,987 447,514 5,086 543,930 (545,072) 1,194,869

Total liabilities 110,041 193,396 750,833 2,888 529,906 (480,466) 1,106,598

chart 62

As at 31 December 2005 the Group’s total capital amount for capitaladequacy purposes was KZT 133,721 million and tier 1 capital amountwas KZT 102,459 million with ratios of 14.38% and 11.02%, respectively.

As at 31 December 2006 and 2005 the Group included in the computa-tion of total capital for capital adequacy purposes the subordinated debtreceived, limited to 50% of tier 1 capital. In the event of bankruptcy orliquidation of the Bank, repayment of this debt is subordinate to therepayments of the Bank’s liabilities to all other creditors.

38. Risk management policiesManagement of risk is fundamental to the Group’s banking business

and is an essential element of the Group’s operations. The main risksinherent to the Group’s operations are those related to credit exposures,liquidity and market movements in interest rates and foreign exchangerates. A description of the Group’s risk management policies in relationto those risks follows.

The Group manages the following risks:

Liquidity riskLiquidity risk refers to the availability of sufficient funds to meet

deposit withdrawals and other financial commitments associated withfinancial instruments as they actually fall due.

The Assets and Liabilities Management Committee (ALMC) controlsthese types of risks by means of maturity analysis, determining theGroup’s strategy for the next financial period. Current liquidity is man-aged by the Treasury Department, which deals in the money markets forcurrent liquidity support and cash flow optimization.

In order to manage liquidity risk, the Group performs daily monitoringof future expected cash flows on clients’ and banking operations, whichis a part of assets/liabilities management process. The ManagementBoard sets limits on the minimum proportion of maturing funds avail-able to meet deposit withdrawals and on the minimum level on inter-bank and other borrowing facilities that should be in place to cover with-drawals at unexpected levels of demand.

Cash flow interest rate riskCash flow interest rate risk is the risk that the future cash flow of a

financial instrument will fluctuate because of changes in market inter-est rates.

The ALMC also manages interest rate and market risks by matchingthe Group’s interest rate position, which provides the Group with a pos-itive interest margin. The Department of Financial Control conductsmonitoring of the Group’s current financial performance, estimates theGroup’s sensitivity to changes in interest rates and its influence on theGroup’s profitability.

The majority of the Group’s loan contracts and other financial assetsand liabilities that bear interest are either variable or contain clausesenabling the interest rate to be changed at the option of the lender. TheGroup monitors its interest rate margin and consequently does not con-sider itself exposed to significant interest rate risk or consequential cashflow risk.

The following table presents an analysis of interest rate risk and thusthe potential of the Group for gain or loss. Effective interest rates arepresented by categories of financial assets and liabilities to determineinterest rate exposure and effectiveness of the interest rate policy usedby the Group.

iv.57



36. Fair value of financial instrumentsEstimated fair value disclosures of financial instruments is made in

accordance with the requirements of IAS 32 “Financial Instruments:Disclosure and Presentation” and IAS 39 “Financial Instruments:Recognition and Measurement”. Fair value is defined as the amount atwhich the instrument could be exchanged in a current transactionbetween knowledgeable willing parties in an arm’s length transaction,other than in forced or liquidation sale. As no readily available pub-lished price quotations in an active market exists for a large part of theGroup’s financial instruments, judgment is necessary in arriving at fairvalue using a valuation technique, based on current economic condi-tions and specific risks attributable to the instrument. The estimatespresented herein are not necessarily indicative of the amounts theGroup could realize in a market exchange from the sale of its full hold-ings of a particular instrument.

The fair value of loans to customers cannot be measured reliably as itis not practicable to obtain market information or apply any other valu-ation techniques on such financial instruments.

37. Regulatory mattersQuantitative measures established by regulation to ensure capital ade-

quacy require the Group to maintain minimum amounts and ratios oftotal and tier 1 capital to risk weighted assets.

The ratio was calculated according to the principles employed by theBasle Committee by applying the following risk estimates to the assetsand off-balance sheet commitments net of allowances for losses:

As at 31 December 2006 the Group’s total capital amount for capitaladequacy purposes was KZT 327,063 million and tier 1 capital amountwas KZT 270,384 million with ratios of 15.05% and 12.45%, respectively.

iv.56



Current value Fair value Current value Fair value

Cash and balances with national (central) banks 209,005 209,005 37,229 37,229

Precious metals 807 807 — —

Financial assets at fair value through profit or loss 322,618 322,618 140,375 140,375

Loans and advances to banks 197,191 197,191 254,287 254,287

Investments available-for-sale 2,628 2,628 427 427

Investments held to maturity 357 357 562 564

Investments in associates 1,755 1,755 425 425

Other assets 13,015 13,015 7,086 7,086

Loans and advances from banks 884,301 884,301 379,206 379,206

Customer accounts 687,806 687,806 303,437 303,437

Derivative financial instruments 3,554 3,554 189 189

Debt securities issued 424,162 434,851 303,133 323,204

Other borrowed funds 68,814 68,814 50,604 50,604

Dividends payable 1 1 1 1

Other liabilities 8,587 8,587 4,591 4,591

Subordinated debt 78,922 79,928 52,213 51,747

chart 63

20

06

20

05

Estimation Description of position

0% Cash and balances with national (central) banks

0% State debt securities

20% Loans and advances to banks for up to 1 year

100% Loans to customers

100% Guarantees

50% Obligations and commitments on unused loans with the initial maturity of over 1 year

100% Other assets


iv.59



The analysis of interest rate and liquidity risk on balance sheet trans-actions is presented in the following table.

iv.58


Year ended 31 December 2006 Year ended 31 December 2006

% in other % in other% in KZT % in USD currencies % in KZT % in USD currencies

Assets:Financial assets at fair value through profit or loss 6.54 4.95 11.00 2.90 4.62 10.00

Loans and advances to banks 1.97 8.26 2.51 2.44 4.43 2.07

Loans to customers 13.56 12.20 12.89 13.25 12.32 10.72

Investments available-for-sale and held to maturity 8.13 9.21 7.05 3.60 — 4.10

Liabilities:Loans and advances from banks 3.01 6.44 4.65 2.07 5.39 2.91

Customer accounts 5.44 4.20 4.41 4.61 3.74 4.39

Debt securities issued 7.00 8.13 11.47 7.00 9.02 9.88

Other borrowed funds 1.95 6.90 5.00 2.38 6.81 5.00

Subordinated debt 7.50 8.32 — 7.50 9.47 —

KZT million

Maturityundefined

(including allo- 31 December wance for 2006

Up 1 month 3 months 1 year impairment Totalto 1 month to 3 months to 1 year to 5 years Over 5 years losses) (KZT million)

Assets:Loans and advances to banks 152,190 21,099 21,722 27 1,293 — 196,331

Financial assets at fair value through profit or loss 38,297 217,265 64,627 613 — — 320,802

Investments available-for-sale 475 — 557 1,207 350 — 2,589

Investments held to maturity — — 39 22 290 — 351

Loans to customers 108,530 136,764 317,916 619,350 463,174 — 1,645,734

Total interest bearing assets 299,492 375,128 404,861 621,219 465,107 — 2,165,807

Cash and balances with national (central) banks 209,812 — — — — — 209,812

Investments in associates — — — — — 1,755 1,755

Goodwill — — — — — 2,405 2,405

Property, equipment and intangible assets — — — — — 15,681 15,681

Accrued interest income on interestbearing assets 29,322 5,013 1,427 59 6 — 35,827

Other assets 4,142 2,319 6,439 115 — — 13,015

Total assets 542,768 382,460 412,727 621,393 465,113 19,841 2,444,302

Liabilities:Loans and advances from banks 336,544 111,831 51,564 379,901 1,070 — 880,910

Customer accounts 355,322 116,990 105,051 78,489 24,488 — 680,340

Debt securities issued 4,288 661 33,589 142,960 235,720 — 417,218

Other borrowed funds — — 262 6,804 61,493 — 68,559

Subordinated debt — — 41 5,988 71,216 — 77,245

Total interest bearing liabilities 696,154 229,482 190,507 614,142 393,987 — 2,124,272

Derivative financial instruments 73 2,554 927 — — — 3,554

Provisions 712 378 1,306 1,640 18 2,704 6,758

Dividends payable 1 — — — — — 1

Deferred income tax liability 11,624 5,831 16 — — — 17,471

Accrued interest expense on interestbearing liabilities 5,962 5,738 7,266 735 32 — 19,733

Other liabilities 2,518 3,395 2,654 20 — — 8,587

Total liabilities 717,044 247,378 202,676 616,537 394,037 2,704 2,180,376

chart 65

KZT million

Maturityundefined



Assets:Loans and advances to banks 227,816 18,267 6,716 — 1,340 — 254,139

Financial assets at fair value through profit or loss 43,054 22,057 73,538 77 — — 138,726

Investments available-for-sale — — 36 287 97 — 420

Investments held to maturity 13 5 133 125 280 — 556

Loans to customers 38,910 43,222 164,218 285,621 196,492 — 728,463

Total interest bearing assets 309,793 83,551 244,641 286,110 198,209 — 1,122,304

Cash and balances with national (central) banks 37,229 — — — — — 37,229

Investments in associates — — — — — 425 425

Goodwill — — — — — 2,405 2,405

Property, equipment and intangible assets — — — — — 8,662 8,662

Accrued interest income on interestbearing assets 6,020 4,132 5,036 1,560 10 — 16,758

Other assets 2,475 361 3,707 334 209 — 7,086

Total assets 355,517 88,044 253,384 288,004 198,428 11,492 1,194,869

Liabilities:Loans and advances from banks 95,500 10,200 192,422 75,590 4,338 — 378,050

Customer accounts 167,159 24,658 62,131 43,704 1,189 — 298,841

Debt securities issued 74 1,586 2,152 113,331 181,197 — 298,340

Other borrowed funds — — 23 3,632 46,704 — 50,359

Subordinated debt — — — 6,377 45,129 — 51,506

Total interest bearing liabilities 262,733 36,444 256,728 242,634 278,557 — 1,077,096

Derivative financial instruments 188 — 1 — — — 189

Provisions 625 265 1,219 416 64 2,345 4,934

Dividends payable 1 — — — — — 1

Deferred tincome еax liability — — — 8,290 — — 8,290

Accrued interest expenses on interestbearing liabilities 2,188 1,268 6,593 1,448 — — 11,497

Other liabilities 1,330 2,075 746 440 — — 4,591

Total liabilities 267,065 40,052 265,287 253,228 278,621 2,345 1,106,598

Liquidity gap 88,452 47,992 (11,903) 34,776 (80,193)

Interest sensitivity gap 47,060 47,107 (12,087) 43,476 (80,348)

Cumulative interest sensitivity gap 47,060 94,167 82,080 125,556 45,208

Cumulative interest sensitivity gap as a percentage of total assets 3.94% 7.88% 6.87% 10.51% 3.78%

chart 66

KZT million

Maturityundefined



Liquidity gap (174,276) 135,082 210,051 4,856 71,076

Interest sensitivity gap (396,662) 145,646 214,354 7,077 71,120

Cumulative interest sensitivity gap (396,662) (251,016) (36,662) (29,585) 41,535

Cumulative interest sensitivity gap as a percentage of total assets (16.23)% (10.27)% (1.50)% (1.21)% 1.70%

continuedchart 64


Derivative financial instrumentsFair value of derivative financial instruments is included in the curren-

cy analysis presented above. The following table presents further analy-sis of currency risk by types of derivative financial instruments as at31 December 2005:

Price RiskPrice risk is the risk that the value of a financial instrument will fluc-

tuate as a result of changes in market prices whether those changes arecaused by factors specific to the individual security or its issuer or factorsaffecting all securities traded in the market. The Group is exposed toprice risks of its products which are subject to general and specific mar-ket fluctuations.

The Group manages price risk through periodic estimation of poten-tial losses that could arise from adverse changes in market conditionsand establishing and maintaining appropriate stop-loss limits and mar-gin and collateral requirements. With respect to undrawn loan commit-ments the Group is potentially exposed to a loss of an amount equal tothe total amount of such commitments. However, the likely amount ofa loss is less than that, since most commitments are contingent uponcertain conditions set out in the loan agreements.

iv.61iv.60





Currency riskCurrency risk is defined as the risk that the value of a financial instru-

ment will fluctuate due to changes in foreign exchange rates. The Groupis exposed to the effects of fluctuations in the prevailing foreign curren-cy exchange rates on its financial position and cash flows.

The ALMC controls currency risk by management of the open curren-cy position on the estimated basis of KZT devaluation and other macro-economic indicators, which gives the Group an opportunity to mini-mize losses from significant currency rates fluctuations toward itsnational currency. The Treasury Department performs daily monitoringof the Group’s open currency position with the aim to match therequirements of national (central) banks.

Derivative financial instrumentsFair value of derivative financial instruments is included in the curren-

cy analysis presented above. The following table presents further analy-sis of currency risk by types of derivative financial instruments as at 31December 2006:

KZT million

31 DecemberOther 2006

KZT USD EURO RUR currency Total

Assets:Cash and balances with national (central) banks 189,718 10,548 2,707 5,198 834 209,005

Precious metals — — — — 807 807

Financial assets at fair value through profit or loss 76,500 228,059 9,621 8,290 148 322,618

Loans and advances to banks 76,647 90,338 15,061 14,154 991 197,191

Loans to customers 525,052 1,117,469 13,683 22,014 622 1,678,840

Investments available-for-sale 2,625 3 — — — 2,628

Investments held to maturity 318 — — — 39 357

Investments in associates 1,755 — — — — 1,755

Goodwill 2,405 — — — — 2,405

Property, equipment and intangible assets 14,706 — — 847 128 15,681

Other assets 8,964 2,540 399 1,074 38 13,015

Total assets 898,690 1,448,957 41,471 51,577 3,607 2,444,302

Liabilities:Loans and advances from banks 171,762 669,690 24,801 17,574 474 884,301

Customer accounts 387,384 262,057 20,855 16,487 1,023 687,806

Derivative financial instruments 1,310 2,239 — 5 — 3,554

Debt securities issued 3,133 354,654 50,149 7,823 8,403 424,162

Other borrowed funds 156 68,554 104 — — 68,814

Provisions 3,691 1,954 1,108 1 4 6,758

Deferred income tax liabilities 17,370 — — 85 16 17,471

Dividends payable 1 — — — — 1

Other liabilities 6,677 1,396 48 423 43 8,587

Subordinated debt 21,770 57,152 — — — 78,922

Total liabilities 613,254 1,417,696 97,065 42,398 9,963 2,180,376

Open balance sheet position 285,436 31,261 (55,594) 9,179 (6,356)

chart 67

KZT million



Accounts payable on forwards (66,282) (102,482) (3,482) (1,263) — (173,509)

Accounts receivable on forwards 41,725 61,288 61,333 3,046 9,920 177,312

Net derivative financial instruments position (24,557) (41,194) 57,851 1,783 9,920

Total open position 260,879 (9,933) (2,257) 10,962 3,564

chart 68

KZT million



Assets:Cash and balances with the national (central) banks 16,405 16,731 1,168 1,826 1,099 37,229

Financial assets at fair value through profit or loss 13,340 120,375 — 6,660 — 140,375

Loans and advances to banks 4,040 235,826 10,647 2,789 985 254,287

Loans to customers 220,086 501,876 6,487 14,811 151 743,411

Investments available-for-sale 427 — — — — 427

Investments held to maturity 519 — — — 43 562

Investments in associates 425 — — — — 425

Goodwill 2,405 — — — — 2,405

Property, equipment and intangible assets 8,417 — — 146 99 8,662

Other assets 5,057 1,453 93 477 6 7,086

Total assets 271,121 876,261 18,395 26,709 2,383 1,194,869

Liabilties:Loans and advances from banks 16,033 344,891 11,409 5,504 1,369 379,206

Customer accounts 135,747 153,156 7,491 6,230 813 303,437

Derivative financial instruments 94 95 — — — 189

Debt securities issued 4,084 293,888 — 5,161 — 303,133

Other borrowed funds 210 50,183 211 — — 50,604

Provision 2,601 1,966 337 4 26 4,934

Deferred tax liabilities 8,014 — — 257 19 8,290

Dividends payable 1 — — — — 1

Other liabilities 3,418 1,101 34 32 6 4,591

Subordinated debt 16,282 35,930 1 — — 52,213

Total liabilities 186,484 881,210 19,483 17,188 2,233 1,106,598

Open balance sheet position 84,637 (4,949) (1,088) 9,521 150

chart 69

KZT million



Accounts payable on forwards (9,657) (9,080) (795) — (155) (19,687)

Accounts receivable on forwards 6,895 11,277 1,192 15 200 19,579

Net derivative financial instruments position (2,762) 2,197 397 15 45

Total open position 81,875 (2,752) (691) 9,536 195

chart 70

The geographical concentration of assets and liabilities is set out intables below:



Fair value interest rate riskFair value interest rate risk is the risk that the value of a financial

instrument will fluctuate due to changes in market interest rates. The Group manages fair value interest rate risk through periodic esti-

mation of potential losses that could arise from adverse changes in mar-ket conditions. The Department of Financial Control conducts monitor-ing of the Group’s current financial performance, estimates the Group’ssensitivity to changes in fair value interest rates and its influence on theGroup’s profitability.

Credit riskThe Group is exposed to credit risk which is the risk that one party to

a financial instrument will fail to discharge an obligation and cause theother party to incur a financial loss.

Risk management and monitoring is performed within set limits ofauthority, by the Credit Committees and the Bank’s Management Board.Before any application is made by the Credit Committee, all recommen-dations on credit processes (borrower’s limits approved, or amend-ments made to loan agreements, etc.) are reviewed and approved by thebranch risk manager or the Risk Management Department. Daily riskmanagement is performed by the Heads of Credit Departments andBranch Credit Divisions.

The Group structures the level of credit risk it undertakes by placinglimits on the amount of risk accepted in relation to one borrower, or agroup of borrowers, and to industry (and geographical) segments. Limitson the level of credit risk by a borrower are approved quarterly by theManagement Board. The exposure to any one borrower including banksand brokers is further restricted by sub-limits covering on and off-balancesheet exposures which are set by the Credit Committee. Actual expo-sures against limits are monitored daily.

Where appropriate, and in the case of most loans, the Group obtainscollateral and corporate and personal guarantees but a significant por-tion is personal lending, where no such facilities can be obtained. Suchrisks are monitored on a continuous basis and subject to annual or morefrequent reviews.

Off-balance sheet credit liabilities represent unused credit lines, guaran-tees or letters of credit. The credit risk on financial instruments on off-balanceaccounts is defined as a probability of losses due to the inability of a coun-terparty to comply with the contractual terms and conditions. Withrespect to credit risk on commitments to extend credit, the Group is poten-tially exposed to a loss in an amount equal to the total unused commit-ments. However, the likely amount of the loss is less than the total unusedcommitments since most commitments to extend credit are contingentupon customers maintaining specific credit standards. The Group appliesthe same credit policy to the contingent liabilities as it does to the balancesheet financial instruments, i.e. the one based on the procedures forapproving the grant of loans, using limits to mitigate the risk, and currentmonitoring. The Group monitors the term to maturity of off-balance sheetcontingencies because long-term commitments generally have a greaterdegree of credit risk than short-term commitments.

Geographical concentrationThe ALMC exercises control over the risk in the legislation and regulatory

arena and assesses its influence on the Group’s activity. This approachallows the Group to minimize potential losses. The Bank’s ManagementBoard sets up country limits, which are mainly applied by banks of theCommonwealth of Independent States (further—CIS) and Baltic countries.

The Management of the Group considers the main segment to be theCommonwealth of Independent States, including the Republic ofKazakhstan, in which similar risks and profitability are inherent.

iv.62



Unique shapes received as a result of erosion and weathering cantake you to mysterious, unreal world of fantastic sand sculptures.

KZT million

OECD Non-OECD 31 December Kazakhstan CIS countries countries 2006 Total

Assets:Cash and balances with national (central) banks 189,711 6,814 12,480 — 209,005

Precious metals — — 807 — 807

Financial assets at fair value through profit or loss 84,385 8,295 229,938 — 322,618

Loans and advances to banks 63,575 91,693 41,923 — 197,191

Loans to customers 1,180,864 228,282 64,396 205,298 1,678,840

Investments available-for-sale 2,628 — — — 2,628

Investments held to maturity 318 39 — — 357

Investments in associates 1,755 — — — 1,755

Goodwill 2,405 — — — 2,405

Property, equipment and intangibles assets 14,706 975 — — 15,681

Other assets 9,889 1,355 1,742 29 13,015

Total assets 1,550,236 337,453 351,286 205,327 2,444,302

Liabilities:

Loans and advances from banks 63,345 70,923 722,778 27,255 884,301

Customer accounts 642,492 22,603 20,321 2,390 687,806

Derivative financial instruments 983 4 2,565 2 3,554

Debt securities issued 3,322 37,216 383,396 228 424,162

Other borrowed funds 260 2 68,552 — 68,814

Provisions 6,393 149 1 215 6,758

Deferred income tax liabilities 17,370 101 — — 17,471

Dividends payable 1 — — — 1

Other liabilities 6,766 595 1,174 52 8,587

Subordinated debt 21,909 2,570 54,443 — 78,922

Total liabilities 762,841 134,163 1,253,230 30,142 2,180,376

Net position 787,395 203,290 (901,944) 175,185

chart 71

iv.65

jsc kazkommertsbank годовой отчет | 2006


39. Events after the reporting date In January 2007, Kazkommertsbank com ple ted pla ce ment of 103,500,000

ordi na ry sha res of JSC Kazkommertsbank at the price of USD 9.25 per sharein tenge equi va lent through ini ti al public offe ring.

The life insu ran ce sub si di ary, JSC Kazkommerts Life, com men ced itsope ra tions on 3 January 2007.

On 2 February 2007, the sub si di ary, Kazkommerts International B.V.,pla ced two-tranche bonds for euro 750 mil lion and 350 mil lion Englishpound sterling at the rates of 6.785% and 7.625% with matu ri ty in 2017and 2012, respec ti ve ly.

Kazkommertsbank recei ved a per mis sion from the AFN and was regi -ste red with the Agency of the Republic of Kazakhstan on regu la tion ofthe Almaty Regio nal Finan cial Cen ter to cre a te a sub si di ary LLPKazkommerts Almaty Regional Financial Center whose main acti vi ty ispro vi sion of ser vi ces on dea ling with finan cial instru ments at theexpen se and in the inte rests of its cus to mers (as a bro ker), ser vi ces of anomi nal hol der, underwri ter ser vi ces, infor ma ti on, ana ly ti cal and con -sul ting ser vi ces, ser vi ces on con stant announ ce ment and sup port ofsecu rit ies quo ta tion.

In February 2007, Kazkommertsbank open ed two branches inKapchagai and Kaskelen cit ies.



KZT million

OECD Non-OECD 31 December Kazakhstan CIS countries countries 2005 Total

Assets:Cash and balances with national (central) banks 27,124 2,915 7,190 — 37,229

Financial assets at fair value through profit or loss 23,819 6,661 109,895 — 140,375

Loans and advances to banks 18,105 38,728 190,888 6,566 254,287

Loans to customers 569,317 83,918 18,900 71,276 743,411

Investments available-for-sale 427 — — — 427

Investments held to maturity 519 43 — — 562

Investments in associates 291 — 134 — 425

Goodwill 2,405 — — — 2,405

Property, equipment and intangible assets 8,417 245 — — 8,662

Other assets 4,929 635 1,053 469 7,086

Total assets 655,353 133,145 328,060 78,311 1,194,869

Liabilities:Loans and advances from banks 29,607 23,138 319,685 6,776 379,206

Customer accounts 257,275 9,264 18,669 18,229 303,437

Derivative financial instruments 95 1 93 — 189

Debt securities issued 4,135 20,129 277,416 1,453 303,133

Other borrowed funds 433 3 50,168 — 50,604

Provisions 4,100 685 4 145 4,934

Deferred income tax liability 8,014 276 — — 8,290

Dividends payable 1 — — — 1

Other liabilities 3,167 230 1,110 84 4,591

Subordinated debt 22,408 — 29,805 — 52,213

Total liabilities 329,235 53,726 696,950 26,687 1,106,598Open balance sheet position 326,118 79,419 (368,890) 51,624

chart 72

The canyon lasts for 154 km alongside the Charyn River. This riveris the deepest river in the Northern Tyan-Shyan region (200 km to the east of Almaty)

iv.67iv.66

jsc kazkommertsbank годовой отчет | 2006




Address Telephone

Akmola branch 24, Abai ave., Astana city (3172) 580102, 580211, 580112

Aktau branch 5b, 5 microregion, Aktau city (3292) 301900, 301916

Aktobe branch 58, Abulhair khan ave., Aktobe city (3132) 594611, 594618

49, Baiseitova str., Almaty, (327) 2585123Almaty branch 1, Zhansugurov str. (327) 2588888, 2585444

Atyrau branch Isataya, Atyrau city (31222) 586046, 586042

Zhambyl branch 124, Abaya str., Taraz city (3262) 457387

Zhezkazgan branch 6, Satpayev str., Zhezkazgan city (3102) 721957, 721951

Karaganda branch 63/2, Erzhanov str. Karaganda city (3212) 425942

Consumer Service Center No.1 5, Abdirova ave., Karaganda city (3212) 412133, 413366

Consumer Service Center No.2 7, Mira str., Karaganda city (3212) 589125, 589127

Balhash branch 14, Ostrovskogo str., Balhash city (31036) 49954

Saran Consumer Service Center 12, Lenina str., Saran city (3213 7) 42638

Kokshetau branch 48, B. Momysh uly str., Kokshetau city (3162) 250046, 257085, 256776

195, Baimagambetova str., Kostanai city (3142) 54874093, Lenina str., Rudniy city (31431) 41289, 41269

Kostanai branch 11, Ischanova str., Zhitikara city (31435) 26763

Kyzylorda branch 42, Aiteke bi str., Kyzylorda city (324 2) 262420

11, Isinaliyeva str., Pavlodar city (3182) 585122Pavlodar Branch 12, Mira str., Aksu city (3183 7) 55250

45, Internatsionalnaya str., Petropavlovsk branch Petropavlovsk city (3152) 464634

105a, Abai str. Semipalatinsk city (3222) 566859, 5634391, Kurchatov str., Kurchatov city (322 2 512) 3715

Semipalatinsk branch 141/1, Abulay Khan ave., Urdzhar village (230) 35528, 35529

40, Tauelsyzdik str., Taldykorgan city (3282) 27191555, Zhibek Zholy str., Zharkent city (3282) 150764, 150763

Taldykorgan branch 68, Konaev str., Usharal city (32833) 23327, 23328

Temirtau Branch 20, Republic ave., Temirtau city (3213) 916123

58, Almazova str., Uralsk city (3112) 506278Uralsk branch 5, 5 district, Aksay city (31133) 30799, 31049

70, Ushanov str., Ust-Kamenogorsk city13, Lenin str., Ridder city (236) 24253

Ust-Kamenogorsk branch 18/1, Bocharnikov str., Zuryanovsk city (32335) 40196

69, Oryntayev str., Shelek village, Shelek branch Enbekshi-Kazakh region, Almaty oblast (276) 21305

Shymkent branch 33, Ilyaeva str., Shymkent city (3252) 589900

Ekibastuz branch 130 a, Auezov str.,Ekibastuz city (31835) 41195, extension 3623

branches

Address Telephone

Settlement outlets

2, Kurchatov str., Kurchatov city, Settlement outlet No.3\1, Kurchatov city Eastern-Kazakhstan (82512) 3633, 3715

Kozhanov str., Zhetysai city,Settlement outlet No.8\1, Zhetysai city Eastern Kazakhstan (32534) 61818

Tauke Khan str., Turkestan city,Settlement outlet No.8\5, Turkestan city Southern Kazakhstan (32533) 40884

35, Ismailov str., Saryagash city, Settlement outlet No.8\6, Saryagash city Southern Kazakhstan (32537) 23049

Settlement outlet No.10\4, Ridder city 13, Lenin str., Eastern Kazakhstan

Settlement Outlet No.22/1, Balhash city 2, Karamende bi str., Karaganda region (31036) 40058

Office of Mr. Karimov, Abdrahmanov str., Neftyanik micto region, Kulsary city,

Settlement outlet Kulsary Zhylyoi region, Atyrau oblast

38, Dzhambul str. Hromtau city,Settlement outlet No.1\10 Aktobe oblast (31336) 23420

2b, Gagarin street, Kandyagash citySettlement outlet No.1\10 Aktobe oblast (31333) 36881

127, Gurba str., Satpaev city,Settlement outlet No.12\2 Karaganda oblast (31063) 72975

5b, 5 microregion, Aksai city, Settlement outlet No.2\1 Western-Kazakhstan oblast (31133) 31049

Settlement outlet No.16/1 93, Lenin str., Rydniy city (31431) 41289

Settlement outlet No.4/1 1, Republic ave., Temirtau city (3213) 914406

Subsidiary banks

42, Isanov str., Bishkek city,OJSC “Kazkommertsbank-Kyrgyzstan” Kyrgyz Republic (996) 312664646

Strategic partner

build. 2, 1, Bolshoi Gnezdnikovskiy per., (495) 7923879OOO “Moskommertsbank” Russia, 125009, Moscow Fax (495) 7923880

continued

JSC “Kazkommertsbank”135 zh, Gagarin ave., Almaty,Republic of Kazakhstan, 050060Tel.: 7 (3272) 585101, 585113, 585279, 585280Fax: 7 (3272) 585100, 585281



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The photos were provided by: Inna Ludva, Aigerim Dauletbakova, Anna Kulakova, Venera

Babayeva, Eugeniy Steblyanko.

Temirlik is one of the most beautiful natural monuments, it is formed by sediment. Approximate age of the canyon walls is 12 million years.

KAZKOMMERTSBANK

Kazakhstan–unexploredWealth

2006

annual report

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